Finance and Lending companies’ collection practices now under stricter regulations

Published October 1, 2019, 12:00 AM

by manilabulletin_admin

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President of Philippine Finance Association and Home Credit Philippines’ Head of External Affairs Jude Romano opens the training on Collection Negotiation Strategies and Techniques.

The Securities and Exchange Commission (SEC) is tightening the belt around Lending and Finance companies as it pushes for higher standards for debt collection practices. Last August 2019, the SEC issued Memorandum Circular No. 18 which puts stricter control and regulation on these businesses, regardless if they use third-party service providers (TPSPs) in their collection practices or not.

In support of this new memorandum, the Philippine Finance Association (PFA) recently held a training on “Proper Collection & Negotiation Strategies & Techniques” as a guide for its member companies and TPSPs. PFA President Jude Romano shared, “More than just for the sake of complying, these new regulations can also improve the overall landscape of our business. As industry players, it is our responsibility to build a good reputation for a growing industry like ours.” Romano is also the Head of External Affairs of Home Credit Philippines, a leading provider of installment loans and other products like cash loans to the regular consumer. 

Topics covered included methods on how to effectively do debt collection, situational collection strategies and techniques, and correction of poor collection results.

 

The new SEC Circular was passed following many complaints from customers who have experienced being harassed by debt collectors. The memorandum aims to pose better regulation, especially in the case of finance and lending companies that get the services of TPSPs to avoid liability on client harassment. Companies that do not follow the Circular are subject to fines for their first and second offenses and a possibility of having their Certificate of Authority to suspended or revoked for their third offense. 

Romano underscored the importance of these new regulations. He shares, “Businesses like us should be focused on providing more options to our customers—in other words, improving financial inclusion. Now, if we want that to happen, we need to work on the stigma of getting loans, a huge part of which is connected to debt collection.”

This is a good development for a sector that’s growing in the country. Home Credit Philippines, for example, now has more than 5.5 million customers barely six years since starting its operations in the country. From offering installment loans in stores, it has since added more financial products like credit cards to its roster, proof that the needs of the market are evolving.

“This can help change the way the market looks at us,” Romano shares. “When we do that, we change the overall way we do our business for our, and our customers’ benefit.” 

The training is just one among the projects of the PFA related to the new regulations concerning debt collection. “We have other plans in the pipeline to improve the way we do this part of our business. PFA is now drafting a code of ethics on debt collection which will require its members and TPSPs to comply strictly to,” Romano closes. 

 
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