SEC Memorandum Circular No. 18 (2019)Prohibition on Unfair Debt Collection Practices of Financing and Lending Companies

SEC. 1. Unfair Collection Practices. – FCs, LCs, and TPSPs hired by them may resort to all reasonable and legally permissible means to collect amounts due them under the loan agreement, provided that, in the exercise of their rights and performance of their duties, they must observe good faith and reasonable conduct and refrain from engaging in unscrupulous and untoward acts. Without limiting the general application of the foregoing, the following conduct shall constitute unfair collection practices, which shall be subject to the penalties provided herein:

1. (a) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person;
2. (b) The use of threats to take any action that cannot legally be taken;
3. (c) The use of obscenities, insults, or profane language the natural consequence of which is to abuse the borrower and/or which amount to a criminal act or offense under applicable laws;
4. (d) Disclosure or publication of the names and other personal information of borrowers who allegedly refuse to pay debts, except as may be allowed under Section 2 hereof;
5. (e) Communicating or threatening to communicate to any person loan information, which is known, or which should be known, to be false, including the failure to communicate that the debt is being disputed, except as may be allowed under Section 2 hereof;
6. (f) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a borrower; and
7. (g) Making contact at unreasonable/inconvenient times or hours, which shall be defined as contact before 6:00 A.M. or after 10:00 P.M., unless the account is past due for more than fifteen (15) days, or the borrower has given express consent that the said times are the only reasonable or convenient opportunities for contact. Such consent which shall be evidenced by written, electronic or recorded means, may be given prior to, during, or after the execution of the loan agreement.
8. (h) Notwithstanding the borrower's consent, contacting the persons in the borrower's contact list other than those who were named as guarantors or co-makers shall also constitute unfair debt collection practice.

SEC. 2. Confidentiality of Information. – For purposes of collection, FCs and LCs shall keep strictly confidential the data on the borrower, except under the following circumstances:

1. (a) Disclosure of information with the written or recorded consent of the borrower;
2. (b) Release, submission or exchange of customer information with other financial institutions, credit information bureaus, lenders (potential or actual), their agents and/or representatives;
3. (c) Upon orders of a court of competent jurisdiction or any government office or agency authorized by law;
4. (d) Disclosure to collection agencies, counsels and other agents of the FCs and LCs to enforce the latter's rights against the borrower;
5. (e) Disclosure to third party service providers solely for the purpose of assisting or rendering services to the FCs and LCs in the administration of its lending or financing business; and
6. (f) Disclosure to third parties such as insurance companies, solely for the purpose of insuring the FCs and LCs from borrower default or other credit loss, and the borrower from fraud or unauthorized charges.

The list is closed. Note (c) is an order compelling disclosure — not permission to volunteer a borrower’s details to a government office.

SEC. 3. Outsourcing of Collection. – FCs and LCs may outsource the conduct of collection to a TPSP which shall be regarded as agent of the FCs and LCs. The ultimate responsibility for collection practices and compliance with this Circular remain with the FCs and LCs.

SEC. 4. Handling of Collection Accounts and Customer Service. – FCs and LCs shall adopt policies and procedures to require personnel handling the collection of accounts, whether these are in-house collectors or TPSPs, to disclose his/her full name or true identity to the borrower. FCs and LCs shall also establish a Customer Service Department/Unit or designate personnel who shall be responsible for promptly addressing complaints, questions and concerns of borrowers.