NINETEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES ) i\l]V 26 /'lO :26

Third Regular Session )

SENATE
S. B. No. 2882

Introduced by Senator Robinhood Padilla

AN ACT
PROHIBITING UNFAIR DEBT COLLECTION PRACTICES, PROVIDING
PENALTIES THEREFOR AND FOR OTHER PURPOSES

Over the years, the Securities and Exchange Commission (SEC), the National
Data Privacy Commission and law enforcement agencies have received numerous
complaints against Financing Companies (FCs) and Lending Companies (LCs)
harassing, shaming, and employing abusive, unethical, and unfair means upon their
customers/clients to force the settlement of debts. Likewise, there has been a
proliferation of misuse of customer/client personal information and the public
disclosure of unpaid loans or balances.

In order to evade liability from said unethical practices, lending companies

intentionally seek the services of third-party service providers (TPSPs) in order to raise
their separate juridical personality as defense.

Republic Act No. 9474, otherwise known as the "Lending Company Regulation
Act' and Republic Act No. 7394 otherwise known as the "Consumer Act' do not have
enough protections against the said unethical collection practices.
 This proposed measure declares it as a policy to regulate the collection
practices of FCs and LCs to deter the use of means that are prejudicial to the interest
of the public.

To put the said policy in perspective, prohibited acts in relation to collection of

debts are hereby enumerated and punished. Likewise, FCs and LCs are obligated to
disclose any third-party service provider/s whose services are engaged for purposes
of debt collection. To avoid intentional evasion of liability, this measure imposes upon
FCs and LCs the ultimate responsibility over the prohibited acts that may be committed
by its outsourced TPSPs.

Considering this, the passage of this measure is earnestly sought.

RQBiNHOOlTPADILLA
/ Senator
 NINETEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES ) c.‘. I\!jv 26 .-.i-j
Third Regular Session )

SENATE
S. B. No. 2882

Introduced by Senator Robinhood Padilla

AN ACT
PROHIBITING UNFAIR DEBT COLLECTION PRACTICES, PROVIDING
PENALTIES THEREFOR AND FOR OTHER PURPOSES

Be it enacted by the Senate and House ofRepresentatives of the Philippines in

Congress assembled:

1 Section 1. Short Tide. - This Act shall be known as the "Anti-Unfair Debt
2 CoHection Practices Act."
3
4 Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to
5 regulate the collection practices of Financing Companies and Lending Companies to
6 deter the use of means that are prejudicial to the interest of the public.
7
8 Sec. 3. Definition of Terms. - As used in this Act, the term:
9 a. Financing Companies (FCs) refers to corporations, except banks,
10 investment houses, savings and loan associations, insurance companies,
11 cooperatives, and other financial institutions organized or operating
12 under other special laws, which are primarily organized for the purpose
13 of extending credit facilities to consumers and to industrial, commercial,
14 or agricultural enterprises, by direct lending or by discounting or
15 factoring commercial papers or accounts receivables, or by buying and
16 selling contracts, leases, chattel mortgages, or other evidences of
 1 indebtedness, or by financial leasing of movable as well as immovable
2 property;
3
4 b. Lending Companies (LCs) refers to a corporation engaged in granting
5 loans from its own capital funds or from funds sourced from not more
6 than nineteen (19) persons. It shall not be deemed to include banking
7 institutions, investment houses, savings and loan associations, financial
8 companies, pawnshops, insurance companies, cooperatives and other
9 credit institutions already regulated by law. The term shall be
10 synonymous with lending investors; and
11
12 c. Third party service providers refers to any individual, or entity engaged
13 in the business of providing debt collection services on behalf of
14 Financing Companies and Lending Companies.
15
16 Sec. 4. Prohibited Acts - Financing companies, lending companies, and third-
17 party service providers hired by them may resort to all reasonable and legally
18 permissible means to collect amounts due to them under the loan agreement, provided
19 that, in the exercise of their rights and performance of their duties, they must observe
20 good faith and reasonable conduct and refrain from engaging in unscrupulous and
21 untoward acts. Without limiting the general application of the foregoing, the following
22 conduct shall constitute unfair collection practices:
23
24 a. The use or threat of use of violence or other criminal means to harm the
25 physical person, reputation, or property of any person;
26 b. The use of threats to take any action that cannot be legally taken;
27 c. The use of obscenities, insults, or profane language the natural consequence
28 of which is to abuse the borrower and/or which amount to a criminal act or
29 offense under applicable laws;
30 d. The use of social media or other online platforms to cause humiliation or
31 indignity to the borrowers;
 1 e. Disclosure or publication of the names and other personal information of
2 borrowers who allegedly refuse to pay debts, except as may be allowed under
3 Section 4 hereof;
4 f. Communicating or threatening to communicate to any person loan information,
5 which is known or which should be known, to be false, including the failure to
6 communicate that the debt is being disputed, except as may be allowed under
7 Section 4 hereof;
8 g. The use of any false representation or deceptive means to collect or attempt
9 to collect any debt or to obtain information concerning the borrower; and
10 h. Making contact at unreasonable or inconvenient hours (from 6:00AM or after
11 7:00pm) unless the borrower has given express consent the loan agreement
12 that the said times are the only reasonable or convenient opportunities for
13 contact;
14
15 Notwithstanding the borrower's consent, contacting the persons relatives,
16 colleagues, or acquaintances other than those named as guarantors, surety, or co­
17 makers shall also constitute unfair debt collection practice.
18
19 Sec. 5. Confidentiality ofInformation. - For purposes of collection, FCs and LCs
20 shall keep strictly confidential the data on the borrower, except under the following
21 circumstances:
22
23 a. Disclosure of information with the written or recorded consent of the borrower;
24 b. Release, submission or exchange of customer information with other financial
25 institutions, credit information bureaus lenders (potential or actual), their
26 agents and/or representatives;
27 c. Upon orders of a court of competent jurisdiction or any government office or
28 agency authorized by law;
29 d. Disclosure to collection agencies, counsels and other agents of the FCs and LCs
30 to enforce the latter's rights against the borrower;
31 e. Disclosure to third party service providers solely for the purpose of insuring the
32 FCs and LCs in the administration of its lending or financing business; and
 1 f. Disclosure to third parties such as insurance companies, solely for the purpose
2 of insuring the FCs and LCs from borrower default or other credit loss, and the
3 borrower from fraud or unauthorized charges.
4
5 Sec. 6. Outsourcing of Collection - FCs and LCs may outsource the conduct of
6 collection to a TPSP which shall be regarded as agent of the FCs and LCs. The ultimate
7 responsibility for collection practices and compliance with this Act remain with the FCs
8 and LCs.
9
10 Sec. 7. Disclosure of TPSPs. - Within fifteen (15) days from the engagement of
11 TPSPs, FCs and LCs shall submit to the Securities and Exchange Commission (SEC)
12 and Bangko Sentral ng Pilipinas and cause the online publication on their official
13 website and social media page/s the following information;
14 a. Name of the Third-Party Service Provider/s;
15 b. Business Registration of the TPSP or any proof of registration, if
16 applicable;
17 c. Name of the President, or Compliance Officer, or any duly authorized
18 representative, and his/her official email address; and
19 d. Registered mobile phone numbers used by the TPSP and its Agents used
20 in debt collection.
21
22 An updated disclosure and online publication thereof shall be made within ten
23 (10) days immediately following any changes or amendments to any of the above-
24 mentioned details.
25
26 Sec. 8. Handling of Collection Accounts and Customer Service. - FCs and LCs
27 shall adopt policies and procedures to require personnel handling the collection of
28 accounts, whether these are in-house collectors or TPSPs, to disclose his/her full name
29 or true identity to the borrower.
30
31 FCs and LCs shall also establish a Customer Service Department or Unit or
32 designate personnel who shall be responsible for promptly addressing complaints.
 1 questions and concerns of borrowers. The president, chief executive officer, and/or
2 compliance officer of PCs and LCs shall submit to the SEC, within thirty (30) days from
3 the effectivity of this Law, a sworn certification stating the company's compliance with
4 this provision.
5
6 Sec. 9. Penalties. - The commission of any of the prohibited acts mentioned in
7 Section 3 hereof shall be punishable with the following:
8
9 a. First Offense - fine of Fifty Thousand Pesos (P50,000.00);
10 b. Second Offense - fine of One Hundred Thousand Pesos (P100,000.00);
11 c. Third Offense - a fine not less than Five Hundred Thousand Pesos
12 (P500,000.00) but not more than One Million Pesos (P1,000,000.00) and
13 suspension of lending and financing activities for a period of ninety (90)
14 days; and
15 d. Fourth Offense - revocation of Certificate of Authority to Operate as a
16 Financing or Lending Company.
17
18 This is without prejudice to the filing of civil, criminal or administrative cases
19 for the imposition of penalties under the Revised Penal Code, Republic Act No. 10175
20 otherwise known as the "Cybercrime Prevention Act", Republic Act No. 7394 otherwise
21 known as the " Consumer Act', Republic Act No. 10173 otherwise known as the ''Data
22 Privacy Act of 2012" or any other special laws, that may be ordered by the courts
23 or other government agencies.
24
25 Sec. 10. Applicability of the Corporation Code. - The penalties provided under
26 this Act shall be without prejudice to the penalties that may be imposed by the SEC
27 pursuant to Presidential Decree No. 902-A, Republic Act No. 11232, as amended, and
28 all other relevant laws, rules and regulations being implemented by the SEC.
29
30 Sec. 11. Applicability to Online Lending Platforms or Applications. - All financing
31 services conducted or facilitated through the use of online platforms or applications
32 are likewise covered by these Act.
1 Sec. 12. Separability Clause. — If any provision of this Act shall be held
2 unconstitutional or invalid, the other provisions not otherwise affected shall remain in
3 full force and effect.

4 Sec. 13. Repeating Clause. — All laws, decrees, orders, issuances, and rules
5 and regulations or parts thereof inconsistent with the provisions of this Act are hereby
6 repealed or modified accordingly.

7 Sec. 14. Effectivity Clause. — This Act shall take effect fifteen (15) days after
8 its publication in the Official Gazette or in at least two (2) newspapers of general
9 circulation.

Approved,