President Duterte recently signed into law Republic Act No. 11765, dubbed the “Financial Products and Services Consumer Protection Act.”
The law aims to protect the rights of financial consumers to, among other things, (a) fair and just treatment; (b) disclosure and transparency of financial products and services; and (c) the protection of their assets against fraud and misuse.
The Bangko Sentral ng Pilipinas, the Securities and Exchange Commission (SEC), the Insurance Commission and the Cooperative Development Authority are the regulators of the law.
It was passed in response to numerous public complaints about financial and investment frauds that cheated thousands of Filipinos out of their hard-earned money.
Lately, these illegal acts have increased with the popularity of social media and other means of communication on the Internet.
With the clear definition of consumer or financial fraud and the delineation of duties and responsibilities of regulators, the incidence of such fraud should be significantly reduced.
The law defines “investment fraud” as any form of deceptive solicitation of investments from the public.
This includes Ponzi schemes and other schemes involving the promise or offer of profits or returns from investments or contributions from investors themselves.
It also covers boiler room operations and offering or selling investment plans to the public without the proper license from the SEC, unless the offering or selling is exempt from registration with the SEC.
Boiler room operation refers to the use of high pressure sales tactics to sell stocks or other forms of financial instruments to randomly called people.
Anyone who commits investment fraud is liable to a fine of not less than P50,000 but not more than P5 million, or imprisonment for seven to 21 years, or both, at the discretion of the court.
The law states that “no provision of a financial product or service contract shall be legal or enforceable if such provision waives or otherwise deprives a customer of any legal right to sue the financial service provider, to receive information, to have their complaints handled and resolved, or to have their non-public customer data protected.
This prohibition relates to the practice of certain providers of financial products or services of convincing their clients to sign documents written in very small print (and full of legalese) which exempt them from any liability or damage if their declarations are untrue. later turned out to be false. .
To further protect the public, financial service providers are prohibited from employing abusive collection or debt collection practices against their customers.
To give teeth to this prohibition, the law broadened the coverage of persons who could be held liable for committing investment fraud.
The financial services provider is liable for the acts or omissions of its directors, trustees, officers, employees or agents in the marketing and dealing with customers of its financial products and services.
If the financial service provider has approved third-party service providers, it is jointly and severally liable for the marketing and transaction acts of the latter, including the collection of debts from clients.
This means that an errant financial service provider cannot escape liability by claiming that its marketing agents acted in violation of its marketing regulations or were unaware that they were engaging in illegal pressure tactics. to enforce their payment obligations.
Hopefully, this provision would put an end to the pernicious practice of some debt collectors of harassing customers who default on their payment obligation by calling them in the middle of the night or writing to their friends or colleagues about non-payment of the debt. , or posting their names and photos on social media, to name a few.
Regulators have one year from the date of entry into force of the law to develop its implementing rules and regulations. INQ
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