The government passed Republic Act (RA) No. 11765, otherwise known as Financial Products and Services Consumer Protection Act, to ensure that appropriate mechanisms are in place to protect the interest of consumers of financial products and services under the conditions of transparency, fair and sound market conduct, and fair, reasonable, and effective handing of financial consumer disputes, which are aligned with global best practices.
RA 11765 mandates the State to implement measures to protect the following rights of financial consumers:
1. Right to equitable and fair treatment;
2. Right to disclosure and transparency of financial products and services;
3. Right to protection of consumer assets against fraud and misuse;
4. Right to data privacy and protection; and right to timely handling and redress of complaints.
The law applies to financial products or services offered or marketed by any financial service provider.
As defined in the law, financial consumer refers to a person or entity, or their duly appointed representative, who is a purchaser, lessee, recipient, or prospective purchaser, lessee or recipient of financial products or services. It shall also refer to any person, natural or juridical, who had or has current or prospective financial transaction with a financial service provider pertaining to financial products or services.
Financial product or service refers to financial products or services which are developed or marketed by a financial service provider which may include, but are not limited to, savings, deposits, credit, insurance, pre-need and health maintenance organization (HMO) products, securities, investments, payments, remittances and other similar products and services. This also includes digital financial products or services which pertain to the broad range of financial service accessed and delivered through digital channels.
Financial service provider pertains to a person, natural or juridical, which provides financial products or services that are under the jurisdiction of the financial regulators. It also includes Investment Advisers are defined in the law.
The law grants the financial regulators, i.e., Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), Insurance Commission, and Cooperative Development Authority, the following powers:
1. Rulemaking, which is the authority to formulate their own standard and rules for the application of the provisions of the law to the specific financial products or services within their jurisdiction.
2. Market Conduct Surveillance and Examination, which allows them to conduct surveillance and examination, on-site or off-site, on their respective supervised financial service providers.
3. Market Monitoring, which give them the authority to require their respective supervised financial service providers and their third party agent/service providers to submit reports or documents.
4. Enforcement, which empowers them to impose enforcement actions on their respective supervised financial service providers for noncompliance with the RA 11765 and other existing laws pertinent to the jurisdiction and authority of the respective financial regulators.
5. Consumer Redress or Complaints Handling Mechanisms, which refers to provision of efficient and effective consumer redress or complaints handling mechanism such as mediation, conciliation or other modes of alternative dispute resolution to address conflict/dissatisfaction from financial consumers arising from financial products or services.
6. Adjudication, which authorizes them to adjudicate all actions as provided under existing laws.
Specifically, the BSP and SEC have the authority to adjudicate actions arising from or in connection with financial transactions that are purely civil in nature, and the claim or relief prayed for by the financial consumer is solely for payment or reimbursement of sum of money not exceeding the amount of ten million pesos (P10,000,000.00).
In the exercise of their adjudicatory powers, the BSP and SEC have the power to issue subpoena duces tecum and summon witnesses to appear in their proceedings and when appropriate, order the examination, search and seizure of all documents, and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before them. Further, the BSP and SEC have the authority to punish in contempt, both directly and indirectly, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court.
RA 11765 imposes the following duties and responsibilities to the financial service providers:
1. Board and Senior Management Oversight, which requires the Board of Directors and the members of the senior management of the financial service providers to ensure conformity with the law and provide the means by which they shall identify, measure, monitor, control, and manage consumer protection risks inherent in their operations, in accordance with the rules and regulations of their financial regulators.
2. Appropriate Product Design and Delivery, which entails continuous evaluation of their financial products or services to ensure that they are appropriately targeted to the needs, understanding and capacity of both their markets and their clients, which includes, among others, affordability and suitability assessments, cooling-off period, and pre-payment of loans and other credit accommodations.
3. Transparency, Disclosure, and Responsible Pricing, which requires financial service providers to ensure that they adopt disclosure principles in their communications and their contracts with financial consumers.
4. Fair and Respectful Treatment of Clients, which states that financial service providers shall not discriminate against clients on the basis of race, age, financial capacity, ethnicity, origin, gender, disability, health condition, sexual orientation, religious affiliation, or political affiliation. However, financial service providers may provide distinction, as necessary, when making a risk assessment on a specific financial product or service.
5. Privacy and Protection of Client Data, which provides that financial service providers must respect the privacy and protect the data of their clients.
6. Financial Consumer Protection Assistance Mechanism, which requires each financial service providers to establish a single consumer assistance mechanism for free assistance to financial consumers on financial transaction concerns, and shall include handling of complaints, inquiries and requests.
7. Information Security Standards, which obligates financial services to adopt and implement information security standards to ensure the safety and protection of the confidentiality, integrity, availability, authenticity, and non-repudiation of the client's information and financial transactions and to ensure the data privacy of their clients.
8. Bundling of Products, which states that when a financial consumer is obliged by the financial service provider to purchase any product, as a pre-condition for availing a financial product or service, the financial consumer shall have the option to choose the provider of such product subject to reasonable standards set by the financial service provider.
The law has a no waiver of rights clause. It states that no provision of a contract for a financial product or service shall be lawful or enforceable if such provision waives or otherwise deprives a client of a legal right to sue the financial service provider, receive information, have their complaints addressed and resolved, or have their non-public client data protected.
The law likewise holds financial service provider solidarily liable with the accredited third-party service providers for their acts or omissions in marketing and transacting with financial consumers for its financial products and services.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
