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Financial Products and Services Consumer Protection Act (FCPA). RA 11765

Posted on : May 5, 2023 By
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Financial Consumers Protection in Black and White

“We must never let our people agonize on where their money went. Inspiring trust and confidence in the system will lead us to our goal of greater financial inclusion.”

These were the words of Senator Grace Poe, Chairperson of the Committee on Banks, Financial Institutions and Currencies on FCPA when it was signed into a law. 1 In her sponsorship speech, she described it as “a measure which is set to directly affect the beating heart of our financial system – the consumers.”  2

With the proliferation of online banking, digital wallet platforms, and online transactions among the public, different financial products and services continue to expand. This was also boosted by the pandemic when people decided that cashless and online transactions, to cover the distance constraints, were more practical options for transfers to be made. However, together with this advancement is the expansion of threats of monetary fraud and data breach. Thus, Congress found it necessary that consumers be protected in all their financial transactions. This highlights the objective of the FCPA to strengthen the trust on financial establishments in the Philippines as well as the integrity of all the involved financial market stakeholders. The law seeks to protect the consumers not only against fraudulent transactions and investment fraud, but as well as unreasonable and disadvantageous terms and conditions set up by different financial service providers.

The law declares that it is the policy of the State “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 handling of financial consumer disputes, which are aligned with global best practices. These mechanisms reinforce their confidence in the financial market and foster the stability of the Philippine financial system.” 3

In line with this policy, the law enumerates the specific rights of financial consumers that it aims to protect, namely:

  1. the right to equitable and fair treatment;
  2. the right to disclosure and transparency of financial products and services;
  3. the right to protection of consumer assets against fraud and misuse;
  4. the right to data privacy and protection; and
  5. the right to timely handling and redress of complaints. 4

In seeking to uphold these rights, the public may be encouraged to engage in different financial investments instead of cloaking their money away from these institutions. As additional support for investors, the law provides that each financial service provider must establish a single consumer assistance mechanism for free assistance to financial consumers on financial transactions concerns. 5

The law defines a financial consumer as “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.” 6

The products or services covered under this law are those that are developed or marketed by a financial service provider such as savings, deposits, credit, insurance, pre-need and health maintenance organization (HMO) products, securities, investments, payments, remittances and other similar products and services, including digital financial products or services. 7

On the other hand, a financial service provider is any person, natural or juridical, which provides financial products or services that are under the jurisdiction of their respective regulators, including investment advisers as defined under FCPA. 8 The Financial Regulators referred to are the following government agencies:

  1. Bangko Sentral ng Pilipinas (BSP);
  2. Securities and Exchange Commission (SEC);
  3. Insurance Commission (IC); and
  4. Cooperative Development Authority (CDA). 9

These financial regulators are the agencies primarily responsible in enforcing the law. 10 They are given specific powers to afford them full capacity to carry out the law’s policy. These powers are:

  1. Rulemaking;
  2. Market Conduct Surveillance and Examination;
  3. Market Monitoring;
  4. Enforcement;
  5. Consumer Redress or Complaints Handling Mechanism;
  6. Adjudication; and
  7. Other powers necessary to carry out their express powers. 11

The law gives these regulators the power to determine the reasonableness of interest, charges or fees which a financial service provider may demand, collect, or receive. 12

They may conduct surveillance and examination, on-site or off-site, on their respective supervised financial service providers, consistent with their respective risk-based supervision policies, to ascertain compliance with the law. They are also given full opportunity to examine records and review systems and procedures. 13

In the event of non-compliance with the provisions of the FCPA, the financial regulators may impose enforcement actions such as restriction to collect excessive or unreasonable interests, fees, or charges, disqualification and/or suspension of directors, trustees, officers, or employees of the supervised financial service provider, imposition of fines, suspension, or penalties, issuance of a cease and desist order without the necessity of a prior hearing if in the financial regulator’s judgment, the act or practice, unless restrained, amounts to fraud or a violation of the provisions of the FCPA and its IRR, or may unjustly cause grave or irreparable injury or prejudice to financial consumers. 14

In the event of a cease and desist order, “the financial service provider shall be afforded an opportunity to defend its act or practice in a summary hearing before the financial regulator or its designated body, upon request made by the financial service provider within five (5) calendar days from its receipt of the order. If no such hearing is requested within said period, the order shall be final.” 15

The financial regulators may also suspend the operation of any supervised financial service provider “in relation to a particular financial product or service when in the financial regulator’s judgment, based on findings, the financial service provider is operating in violation of the provisions of [the FCPA], and its IRR.” 16

In any case of noncompliance or breach of the FCPA and other laws under the financial regulator’s jurisdiction, the latter may, in addition to the imposed fine, enter an order requiring accounting and disgorgement of profits obtained, or losses avoided, as a result of a violation of the FCPA and other existing laws, including reasonable interest. 17

Financial regulators are also tasked to provide different ways in handling consumer redress and complaints such as mediation, conciliation and other alternative dispute resolution which the financial consumers may avail of prior to adjudication. 18

In case adjudication ensues, the financial regulators are given the authority to adjudicate all actions as provided under the FCPA and existing laws. 19

Noteworthy is the fact that the decision of the financial regulators in the adjudication shall be final and executory and may not be restrained or set aside by the court except on petition for certiorari on the ground of grave abuse of discretion, or lack or excess of jurisdiction of the financial regulators. 20

Another distinct feature of this law in ensuring that financial consumers may effectively deliberate on a financial investment or commitment is the implementation of a cooling-off period. This will allow a client to “consider the costs and risks of a financial product or service, free from the pressure of the sales team of the financial service provider.” During this period, the financial consumer may cancel or return the contract without penalty; but this does not prevent recovery of the processing costs incurred, as may be approved by the financial regulators. In case of cancellation, financial service providers are prohibited from engaging in practices that unreasonably burden the financial consumer in the exercise of the right of cancellation. 21

Another important mechanism provided by the FCPA to afford protection to financial consumers is the enforcement of transparency, disclosure, and responsible pricing wherein the financial service providers must “adopt disclosure principles in their communications and their contracts, including the use of clear and concise language.” This also includes “updated and accurate disclosure of information such as pricing or any cost associated with the product or service, made in a consistent manner to facilitate a comparison between similar financial products or services across the industry.” They are also made responsible for any statements made in the marketing and sales materials they produce in relation to their products and services. 22

In accordance with the financial consumers’ right to fair and equitable treatment, the law provides 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, save for necessary distinctions in making a risk assessment on a specific financial product or service. 23

The FCPA also provides a penal clause which states that “any person who willfully violates this Act or the rules, regulations, orders, or instructions issued by the financial regulators to implement this Act, shall be punished by imprisonment of not less than one (1) year, but not more than five (5) years, or by a fine of not less than Fifty thousand pesos (P50,000.00) but not more than Two million pesos (P2,000,000.00), or both, at the discretion of the court: Provided, That if the violation is committed by a corporation or a juridical entity, the directors, officers, employees, or other officers who are directly responsible for such violation shall be held liable thereto.” 24

These are only some of the distinct features of the law that shows the effort in establishing trust and security in financial transactions in the Philippines. With the FCPA enacted, hopefully, the financial consumers may be encouraged to invest their hard-earned money through the availment of different financial products and/or services without fear of losing the same in vain.

  1. Retrieved from https://legacy.senate.gov.ph/press_release/2022/0517_poe1.asp, last accessed 20 September 2022.[↩]
  2. Retrieved from https://legacy.senate.gov.ph/press_release/2022/0517_poe1.asp, last accessed 20 September 2022.[↩]
  3. Section 2 of R.A. No. 11765.[↩]
  4. Ibid.[↩]
  5. Section 8 (f) of R.A. No. 11765.[↩]
  6. Section 3 (a) of R.A. No. 11765.[↩]
  7. Section 3 (c) of R.A. No. 11765.[↩]
  8. Section 3 (e) of R.A. No. 11765.[↩]
  9. Section 3 (d) of R.A. No. 11765.[↩]
  10. Section 5 of R.A. No. 11765.[↩]
  11. Section 6 of R.A. No. 11765.[↩]
  12. Section 6 (a) of R.A. No. 11765.[↩]
  13. Section 6 (b) of R.A. No. 11765.[↩]
  14. Section 6 (d) of R.A. No. 11765.[↩]
  15. Ibid.[↩]
  16. Section 6d of R.A. No. 11765.[↩]
  17.  Ibid. [↩]
  18. Section 6 (e) of R.A. No. 11765.[↩]
  19. Section 6 (f) of R.A. No. 11765.[↩]
  20. Id.[↩]
  21. Section 8 (b)[2] of R.A. No. 11765.[↩]
  22. Section 8 (c) of R.A. No. 11765.[↩]
  23. Section 8 (d) of R.A. No. 11765.[↩]
  24. Section 15 of R.A. No. 11765.[↩]
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