The new Financial Products and Services Consumer Protection Act
By: Ramon Vaughn F. Dy III on June 2,2022
REPUBLIC Act (RA) 11765 or the “Financial Products and Services Consumer Protection Act,” which was signed by President Rodrigo Duterte last May 6, 2022, is another legislative milestone for the financial sector.
To ensure that offered financial products and services are safe and secure, legislators saw the need to provide a framework that would safeguard consumers and prevent them from being unduly prejudiced and taken advantage of by unethical service providers or their agents and by fraudulent schemes.
Under RA 11765, the term “financial product or service” refers to products or services developed or marketed by a financial service provider that may include, but are not limited to, savings, deposits, credit, insurance, pre-need and health maintenance organization plans, securities, investments, payments, remittances and other similar products or services. This also includes financial products or services that are accessed and delivered through digital channels. The law empowers regulators such as the Bangko Sentral ng Pilipinas, Securities and Exchange Commission, Insurance Commission, and the Cooperative Development Authority to perform acts necessary for the protection of consumers such as the conduct of market surveillance and examination, provision of complaints handling mechanisms, adjudication and rule-making.
RA 11765 also prescribes the duties and responsibilities of financial service providers to ensure transparency, adequate disclosure, responsible pricing, privacy and protection of client data, and financial consumer protection assistance, among others.
Regulators were given the power to impose enforcement actions on financial service providers for noncompliance with the law. These range from disqualification and/or suspension of directors or employees and the imposition of fines, suspensions or penalties including imprisonment.
Among others, financial service providers were mandated to adopt a clear “cooling-off period” as may be prescribed by law to allow a client to consider the costs and risks of a financial product or service and free them from sales pressure. During this period, a consumer can cancel or return the contract without penalty. However, financial service providers are allowed to recover incurred processing costs. Financial service providers should be fair and respectful toward clients and adopt acceptable disclosure principles in their communication and contracts with consumers. Their obligations include providing updated and accurate information, such as origin or any cost associated with the product or service in a consistent manner to facilitate comparison with similar financial products or services. Each service provider must also establish a single consumer assistance mechanism for free to consumers.
Financial consumer protection mechanisms in RA 11765 include restrictions on the ability of supervised financial service providers to continue to collect excessive or unreasonable interest, fees or charges under the Philippine Credit Card Industry Regulation Law, the institution of consumer redress or complaints handling mechanisms through financial regulators, adoption of the “cooling-off period” and incorporation of provisions of the Data Privacy Act, among others.
By institutionalizing proper mechanisms and safeguarding the rights of consumers, people will not only be enticed to invest but also become more confident in investing in financial products and services. Certainly, reinforced confidence in the Philippine financial market will further stimulate economic growth, which will have a positive effect on the day-to-day lives of people in the country in the long run.
Ramon Vaughn F. Dy III is a graduate of the Ateneo de Manila University School of Law and an associate of Mata-Perez, Tamayo and Francisco (MTF Counsel).