Fair Debt Collection Practices Act

CONGRESS OF THE PHILIPPINES TWENTIETH CONGRESS First Regular Session SENATE S. No. 1744* FINANCIAL PREPARED BY THE COMMITTEE ON BANKS, INSTITUTIONS AND CURRENCIES, WITH SENATORS GATCHALIAN, PADILLA, VILLANUEVA, PANGILINAN, ZUBIRI, GO, TULFO (E.), AND TULFO (R.) AS AUTHORS THEREOF AN ACT REGULATING DEBT COLLECTION PRACTICES TO PROTECT DEBTORS FROM ABUSES, HARASSMENT, UNFAIR TREATMENT, AND MISREPRESENTATION Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title. - This Act shall be known as

2 the "Fair Debt Collection Practices Act"

SEC. 2. Declaration of Policy. - The State shall prohibit

4 and eliminate the use of abusive, deceptive, and unfair debt 5 collection practices to protect debtors against abuse and harassment from unscrupulous lenders and debt collectors. 7 Consistent with Act 11765 Republic No. or the "Financial Products and Services Consumer

Protection Act", the State shall uphold the principles of fair treatment, transparency, and accountability in debt collection.

SEC. 3. Definition of Terms. - As used in this Act:

(a) Debt Collector refers to any person (1) who uses 5 any instrumentality or business, the principal purpose of 6 which is the collection of debts; or (2) who regularly collects 7 or attempts to collect, directly or indirectly, debts owed or asserted to be owed to another. It includes creditors who 9 have in-house collectors or employees/officers who, by reason of their employment/office, engage in debt collection for the former, or any creditor who, in the process of collecting debts, uses any name other than one's own to give the impression that a third person is collecting or attempting to collect such debt. It also includes a debt 15. collection agency or a third-party service provider engaged 16 by a creditor to collect debts owed by another. This definition shall not include: i) A business that acquires a debt or debts through the seizure of accounts receivable under a security agreement;

(ii) A corporation that acquires or merges with a the latter's accounts 2 business and thereby acquires receivable; (iii) A person to whom the contract that gave rise to the debt was assigned for the purpose of financing the transaction; (iv) Any officer or employee of the national or local 7 government to the extent that collecting or attempting to collect any debt is in the performance of their official duties; (v) Any person serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt; and (vi) Any attorney-at-law collecting a debt on behalf of a chent. (b) Contact refers to any communication, whether in person, by telephone, mobile phone, facsimile, e-mail, automated call system, text messaging, voicemail, answering machine, or any other electronic/digital mode, including messages left for a debtor with another person, by voicemail, on an answering machine, or any other form

of communication not specifically excluded. This definition shall not include communications that the debtor expressly consented to or solicited in advance. (c) Creditor refers to a person who has extended credit to a debtor, including credit in the form of a sale on credit, a loan of money, or the provision of goods and 7 services on credit. It includes a financing company and a lending company. (d) Debt refers to a legally enforceable monetary obligation owed by a debtor, including a purchase on credit, accounts receivable, a loan of money, or the provision of goods or services. (e) Debtor refers to an individual who owes a debt, personally or as the owner of a sole proprietorship, a partner in a partnership, or an individual who has provided a personal guarantee. (f) Express Consent refers to consent verifiable through writing, whether in electronic or printed form, or audio recordings.

(g) Financing company refers to a corporation 2 primarily organized to extend credit facilities to consumers 3 and to industrial, commercial, or agricultural enterprises, 4 whether by direct lending; by discounting or factoring commercial papers or accounts receivable; by buying and selling contracts, leases, chattel mortgages, or other 7 evidence of indebtedness; or by financial leasing of movable as well as immovable property. It does not include banks, 9 investment houses, savings and loan associations, 10 insurance companies, cooperatives, and other financial institutions organized and operating under other special laws. (h) Lending company refers to a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons. It does not include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives, and other credit institutions already regulated by law. The term shall be synonymous with lending investors.

Online Lending Platform (OLP) refers to mobile lending applications, websites, and other financial technology (FinTech)-enabled programs or systems where 4 the services and products of financing companies and lending companies are available. (i) Representative means a person duly authorized 7 by the debtor or creditor, as applicable, to contact or be 8 contacted in relation to the debt.

SEC. 4. Acquisition of Location Information. - Any

creditor or debt collector communicating with any person other than the debtor for the purpose of locating the latter shall ensure, prior to collection of personal data, that the processing is specific for the declared purpose and is authorized by the debtor, or is otherwise not protected under Republic Act No. 10173 or the "Data Privacy Act of 2012", or other applicable laws, and that the acquisition is not otherwise prohibited by law; They shall identify themselves, state that they are collecting, confirming, or correcting location information

concerning the debtor, and if requested, identify their employer. They shall not: (a) Access, use, or process the debtor's phone contact 5 list and shall only communicate with the representative of 6 the debtor as defined in this Act; (b) State any detail about the debt or loan contract, except the fact of its existence; (c) Communicate with any such person more than once unless the person requests it or unless such creditor or debt collector reasonably believes that the earlier response was erroneous or incomplete and that the person now has correct or complete location information; (d) Communicate by post card; and (e) Use any language or symbol on any envelope or in the contents of any communication indicating that the debt collector is in the debt collection business or that the communication relates to the collection of debt.

The foregoing notwithstanding, should a creditor or debt collector discover that, with regard to the subject debt, the debtor is represented by an attorney whose name and address can be readily ascertained, such creditor or debt collector shall be prohibited from communicating with any other person under this section, unless the attorney fails to 7 respond within a reasonable period of time to the 8 communication from the debt collector.

SEC. 5. Allowable Debt Collection Practices. -

10 Creditors and debt collectors may use all reasonable and legally permissible means to collect amounts due them under the loan agreement such as undergoing mediation, arbitration, or other forms of alternative dispute 14 resolution, or filing the appropriate complaint before the proper court, among other reconciliatory or judicial means: and Provided, That in the exercise of their rights performance of their duties, they observe good faith and reasonable conduct, and not engage in unduly intrusive, abusive, unfair, and untoward conduct prohibited under this Act.

SEC. 6. Prohibition Against Harassment or Abuse. -

and debt 2 Financing companies, lending companies, 3 collectors shall not harass or engage in oppressive or abusive conduct in connection with the collection of a debt. They shall not: (a) Use or threaten violence or other criminal means 7 on the person, reputation, or property of the debtor or their 8 family; (b) Use insults, obscene or profane. language that abuses or shames the debtor or their family, or which amounts to a criminal act or offense under applicable laws; (c) Disclose, publish, or post the names and other personal information of the debtor who allegedly refuses to pay debts, except as may be allowed under Section 11 of this Act; (d) Advertise for sale any debt to coerce payment; (e) Call, repeatedly and incessantly, the debtor, their family, or any person other than the debtor or engage any such person in telephone or mobile phone conversation

repeatedly or continuously, with intent to annoy, abuse, or harass; (f) Make telephone or mobile phone calls without meaningful disclosure of the caller's identity, except where such disclosure is specifically prohibited under this Act; (g) Send text blasts or indiscriminate messaging to a debtor's phone contact list for the purpose of collecting an outstanding loan; and (h) Other analogous circumstances.

SEC. 7. False or Misleading Representations. -

Creditors and debt collectors shall not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. The following acts shall be considered violations of this section: (a) The unauthorized use of any badge, uniform, or a facsimile thereof; (b) The false representation on the following: (1) the character, amount, or legal status of any debt; or (2) any

• . service rendered or compensation which may be lawfully received by any debt collector for the collection of the debt; (c) The false representation or implication that an 4 individual is: (1) an attorney or that any communication is 5 from an attorney; or (2) an employee or personnel of the government, or that any communication is from such 7 government agency or office; (d) The representation or implication that non- 9 payment of any debt will result in the arrest or imprisonment of any person, in the seizure, garnishment, attachment, or sale of any property or wages, unless such non-payment is unlawful and the debt collector or creditor intends to take legal action; (e) Threatening to take any action that cannot be legally taken; (t) The false representation or implication that a sale, referral, or other transfer of interest in a debt shall cause the debtor to:

(1) Lose any claim or defense in relation to the payment of the debt; or (2) Become subject to any practice prohibited by this Act; (g) The false representation or implication that the debtor committed any crime or other similar conduct contrary to the provisions of this Act; (h) Communicating or threatening to communicate 8 to any person false credit information, including the failure to communicate the fact that a debt is disputed; (i) The use or distribution of any written communication which simulates, or is falsely represented to be, a document authorized, issued, or approved by any court, official, or agency of the national or local government, or which creates a false impression as to its source, authorization, or approval; G) The use of any false representation or deceptive means to collect or attempt to collect any debt, or to obtain information concerning a debtor;

(k) The failure to clearly disclose in all communications that any information obtained will be used for that purpose, except in instances where disclosure of such information is specifically prohibited in this Act; (I) The false representation or implication that accounts have been turned over to innocent purchasers for value; (m) The use of any business, company, or 8 organization name other than the true name of the creditor or debt collector's business, company, or organization; (n) Giving any person, directly or indirectly, by implication or otherwise, any false misleading 12 information in relation to the collection of debt, including references to the police, a law firm, prison, credit history, court proceedings, or a lien or garnishment; and (o) Any analogous circumstances.

SEC. 8. Unfair Collection Practices. - Creditors and

debt collectors shall not use unfair or unconscionable means to collect or attempt to collect any debt. The following acts shall be considered violations of this section:

(a) The collection of any amount other than the 2 principal obligation, including any interest, fee, charge, or incidental expense, unless such amount is expressly or 4 authorized by the agreement creating the debt permitted by law; (b) The acceptance by a debt collector from any person of a check or other payment instrument postdated 8 by more than five (5) days, unless such person is notified in 9 writing of the debt collector's intent to deposit such check 10 or instrument not less than three (3) working days prior to such deposit; (c) Threatening to deposit any postdated check or 13 instrument prior to the date on such check or instrument; (d) Causing communication fees or charges to be imposed on any person by concealing the true purpose of the communication, including through collect telephone calls, telegrams, or similar means;

(e) Taking or threatening to take any non-judicial action to effect dispossession of property or to render it inoperable if: (1) There is no present right to possession of the 5 property claimed as collateral through an enforceable security interest; (2) There is no present right to take possession of the property; or (3) The property is exempt by law from such dispossession or from being rendered inoperable; (f) Using any language or symbol, other than the debt collector's address on any envelope when communicating with a debtor by mail or by telegram; and (g) Processing or disclosure of debtor's personal data without lawful basis or in a manner that is unnecessary, inadequate, irrelevant, unsuitable, or excessive, in relation to the specified and declared purpose.

SEC. 9. Other Prohibited Acts and Practices. - No debt

collector shall:

(a) Collect or attempt to collect money for a creditor except on the belief in good faith that the money is due and owed by the debtor to the creditor; (b) Fail to provide a contact number for the debtor to call when the debt collector uses an automated call system to contact the debtor; (c) Collect or attempt to collect a debt without providing the real name of the agent or representative of 9 the debt collector, the contact number, the registered name, and address of the debt collector; (d) Make any arrangement with a debtor to accept, as final settlement, a sum of money, that is less than the amount of the balance due and owing to a creditor without 14 the prior express consent of the latter; (e) Fail to provide a written report on the account status of any person with whom the debt collector transacts; (f) Make a call to the debtor or any person other than the debtor for the purpose of collecting or attempting

to collect a debt on any day outside the window of 6AM to 2 10PM unless the debtor has given express consent or 3 unless said hours are the only reasonable or convenient 4 opportunities for contact; (g) Directly or indirectly threaten or state an intention to proceed with any action for which the debt 7 collector does not have the prior express consent of the creditor or for which there is no lawful authority; (h) Continue to collect or attempt to collect money from, or to communicate with: (1) A person who has informed the debt collector that he or she is not the debtor, unless the debt collector has taken all reasonable precautions to ensure that the person is in fact the debtor; or (2) The debtor, after he or she has informed the debt collector, through verifiable means, that the debt is in dispute and that either the creditor or the debtor has taken the matter to court;

(i) Contact the debtor's spouse, relative, neighbor, friend, or acquaintance unless the contact is limited to the 3 purpose of confirming or correcting the debtor's residential address or contact details; () Contact the debtor's employer for any purpose other than to confirm the debtor's employment status, 7 business title, and the address of the business, in preparation for legal proceedings; (k) Contact the debtor directly after the latter has notified the debt collector in writing to communicate only with the debtor's representative, providing therein the number of such current address and telephone representative for the purpose of: (1) Making reasonable arrangements to discuss the debt with the debt collector; and (2) Discussing the debt with the debt collector in accordance with such arrangements; (l) Contact a debtor at his or her place of employment after the debtor has requested the debt

collector not to do so: Provided, That the debtor makes reasonable arrangements to discuss the debt with the debt collector and actually discusses the debt in accordance with such arrangements; (m) Communicate information about the debt or the existence of the debt with a person other than the debtor, a 7 guarantor of the debt, the debtor's representative, or the 8 creditor, unless the debtor has expressly consented to communicating such information to persons other than those enumerated herein; (n) Refuse to provide sufficient information on the 12 identity of the original and current creditor, as well as the details of the debt, upon request of the debtor; (o) Enter into or arrange automatic wage or salary assignments with a debtor or the employer of a debtor without the debtor's consent; (p) Cancel or alter a payment agreement with a debtor after the latter has complied with the terms of the agreement and the debtor's financial circumstances have

not changed the debtor has materially, unless misrepresented his or her financial circumstances; (q) Process debtor's contact list, in whatever form, in a manner that is unconstrained, excessive, and disproportional to the specified and declared purpose; or (r) Treat the debtor's representative as defined in 7 this Act as a guarantor or a surety.

SEC. 10. Prohibited Agreements. - Any agreement

9 entered into by the debtor and the debt collector shall be deemed void if that agreement: (a) Misrepresents the rights and powers of a person collecting or attempting to collect a debt; (b) Misrepresents the obligations or legal liabilities 14 of a debtor; (c) Is misleading as to its true nature and purpose; or (d) Requires or results in the debtor's waiver of any of his or her rights under this Act.

SEC. 11. Confidentiality of Information. - Creditors

2 and debt collectors shall keep the data on the debtor under the 3 strictly confidential, except following circumstances: (a) Disclosure of information with the written consent of the debtor specific to the declared purpose, or 7 when authorized under existing laws; (b) Release, submission, or exchange of customer 9 information with other financial institutions, credit 10 information bureaus, lenders, their subsidiaries and affiliates in accordance with relevant provisions of 12 Republic Act No. 10173; (c) Upon order of a court of competent jurisdiction or any government office or agency authorized by law; to (d) Disclosure by creditors debt collectors, counsels, and other agents to enforce their rights against the debtor; and (e) Disclosure to third parties, such as insurance companies, solely to insure the creditor from default of the

debtor or other credit loss, or insuring the debtor from fraud or unauthorized charges. In any case, creditors shall retain ownership and accountability for debtors' data handled by their debt collectors, collection agents, or third-party service providers.

SEC. 12. Issuance of Receipts. - Every debt collector

cash 7 shall issue an acknowledgment receipt for all 8 transactions, payments made in person, or payments made by the debtor. Such acknowledgment receipt shall contain the following information: (a) The date the amount is collected or received; (b) The name of the debtor; (c) The name of the person on whose behalf the debt collector acts; (d) The amount received from the debtor; and (e) The signature of the debt collector.

SEC. 13. Settlement Agreement. - Once a debt collector

reaches a settlement agreement with a debtor and the

amount in such agreement has been paid in full, the debt 2 collector shall issue to the debtor an invoice containing the following information: (a) The amount paid; (b) The name of the creditor or creditors; (c) A statement that the amount received is in final 7 settlement of the debt/s owed; and (d) The signature of the debt collector.

SEC. 14. Request for Accounting. - Upon the request

of the debtor, the debt collector shall provide a complete accounting of all the details of the debt: Provided, That if such accounting is not in the possession of the debt collector, the latter must request the creditor to provide the same: Provided, further, That if the creditor fails to provide a complete accounting of the debt within thirty (30) days after receiving a request therefor, the debt collector must: (a) Inform the debtor in writing that it cannot provide the accounting and the reasons for the same; and

(b) Cease all collection activity for that account and not resume collection activity until the accounting is provided. A debtor may request a complete accounting only once every six (6) months, unless the debt collector fails to provide the complete accounting as requested: Provided, 6 That in the case of short-term loans offered by creditors, 7 the Securities and Exchange Commission (SEC) may prescribe the appropriate periods for the provision of the accounting and the frequency of such requests by the debtor.

SEC. 15. Loan Cost Transparency and Calculator. -

11 All creditors utilizing OLPs that are operating in the 12 Philippines shall integrate within their application or digital platform a Loan Cost Calculator that: (a) Allows prospective and existing debtors to 15 compute, in real time, the total amount payable for any debt or loan product offered or outstanding, including, but 17 not limited to: (1) The principal amount;

(2) The interest charges, expressed both as a rate and monetized amount; (3) All fees, penalties, charges, and other costs associated with the debt or loan contract; and (4) The schedule of amortization or payment breakdown over time. (b) Must be accessible, clearly visible before the prospective debtor executes or signs any loan agreement, and available at any time during the existence of the loan; (c) Must dynamically update calculations when any changes in the debt or loan terms occur, including, but not limited to, restructuring, refinancing, and imposition of additional fees; and (d) Must present results in a user-friendly format, with clear, itemized breakdowns and plain language explanations.

SEC. 16. Administrative Penalties. - The SEC shall

issue rules and regulations for the implementation of the

provisions of this Act and for the imposition of reasonable administrative penalties for violations thereof For this purpose, the SEC may prescribe and impose 4 penalties such as monetary fines not exceeding One million 5 pesos (P1,000,000.00); suspension of financing and lending activities; and/or revocation of the erring creditor's 7 Certificate of Authority to Operate as a Financing or Lending Company.

SEC. 17. Civil Liability. -

(a) Amount of Damages. - Any creditor or debt collector who violates any of the provisions of this Act with respect to any person shall be liable to such person in an amount equal to the sum of: (1) The damages sustained by such person as a result of the violation; (2) In the case of any action by an individual, such additional damages as the court may allow, but not exceeding Thirty thousand pesos (P30,000.00); or

(3) In the case of a class action, such amount for each named plaintiff as could be recovered under 3 paragraphs (1) and (2), as well as such additional amount 4 as the court may allow for all other class members: 5 Provided, That such additional damages shall not exceed 6 Sixty thousand pesos (P60,000.00) or one percent (1%) of the net worth of the creditor or debt collector, whichever is higher. (b) Factors to be Considered by the Courts. - In 9 determining the amount of liability under paragraph (a) of this section, the courts shall consider, along with other relevant factors, the following: (1) In any individual action under paragraph (a)(2) of this section, the frequency and persistence of non- compliance by the creditor or debt collector, the nature of such non-compliance, and the extent to which such non- compliance was intentional; and (2) In any class action under paragraph (a)(3) of this section, the frequency and persistence of non-compliance by the creditor or debt collector, the nature of such non-

compliance, the resources of the creditor or debt collector, the number of persons adversely affected, and the extent to which the creditor or debt collector's non-compliance was intentional. (c) Intent. - A creditor or debt collector may not be held liable in any action brought under this section if the 7 creditor or debt collector shows by a preponderance of not intentional evidence that the violation was and resulted from an error in good faith. (d) Jurisdiction. - An action to enforce any liability under this Act may be brought in any court of appropriate jurisdiction.

SEC. 18. Solidary Liability. - A creditor shall be

responsible for ensuring that its debt collectors, authorized representatives, or third-party service providers engaged in debt collection comply with this Act and all applicable laws, rules, and regulations. The creditor shall be solidarily liable with such agents or service providers for any violation of this Act committed in the course of debt collection.

SEC. 19. Debtor Complaints and Redress Mechanism. -

2 Financing and lending companies shall establish and 3 maintain a customer service department, with actual human agents and not merely machines or bots, who shall be responsible for promptly addressing questions and concerns of debtors and serve as an internal complaint- 7 handling and redress mechanism that is accessible, 8 transparent, and free of charge. The SEC shall oversee 9 compliance with this requirement and provide an external 10 redress mechanism for escalation of unresolved complaints, including an accessible online platform for reporting violations of this Act. The SEC shall have a dedicated complaints desk to address violations of this Act and shall act on complaints received through such desk within five (5) working days from receipt. Failure of the responsible public official or employee to act on any complaint within the prescribed period shall constitute simple neglect of duty, subject to the filing of the appropriate administrative action based on prevailing Civil Service Commission rules and regulations:

Provided, That in cases where the delay is due to force majeure or other analogous circumstances, the prescribed period shall be suspended, and appropriate adjustments cases of shall be made: Provided, further, That in such justifiable delay, the responsible public official or employee shall notify the complainant of the reason for the delay and 7 the adjusted period to act on the complaint.

SEC. 20. Information and Education Campaign. - The

9 SEC shall conduct a continuing information and education 10 campaign to inform the general public of their rights under 11 this Act. It shall inform financial consumers on how to identify abusive, deceptive, and unfair debt collection practices and on how to avail of their rights including 14 requests for accounting or issuance of receipts, use of the loan cost available redress calculator, and other mechanisms.

SEC. 21. Temporary Restraining Order. - In cases

where the creditor or debt collector resorts to the use of threat, intimidation, or commission of other crimes as a

• means of effecting debt collection, the debtor may apply for a temporary restraining order (TRO) or injunction against such creditor or debt collector before the appropriate courts. The application shall be supported by affidavits and other evidence to establish the use of threat, intimidation, or commission of other crimes.

SEC. 22. Good Faith Requirement. - The protections

under this Act shall only apply to debtors who invoke them 9 in good faith and shall not be available to those who invoke such protections to evade payment of their obligation.

SEC. 23. Interpretation. - In case of doubt, the

provisions of this Act, including its implementing rules and regulations and any subsequent issuances of the implementing agencies, shall be construed in a manner that accords the highest respect for human dignity, human rights, and individual privacy.

SEC. 24. Separability Clause. - If any provision of

this Act is declared invalid or unconstitutional, the

remainder thereof not otherwise affected shall remain in full force and effect.

SEC. 25. Repealing Clause. - All laws, presidential

decrees, executive orders, presidential proclamations, rules and regulations, or parts thereof contrary to or inconsistent with this Act are hereby repealed or modified accordingly.

SEC. 26. Effectivity. - This Act shall take effect after

fifteen (15) days following its publication in the Official Gazette or in a newspaper of general circulation. Approved,