BSP to tighten financial consumer protection

Published June 26, 2022, 9:10 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) wants to resolve disputes involving amounts of up to P10 million as contained under the first draft of the proposed guidelines for the implementation of the Financial Consumer Protection Act of 2022 (FCPA).

The significance of the pro-consumer law, besides BSP improving its complaints handling mechanism, is that its consumer redress includes central bank’s capability to adjudicate or pronounce judgement in connection with “purely civil in nature” financial transactions. With this power, the BSP can order the reimbursement of a sum of money not exceeding P10 million.

Online financial consumers (Manila Bulletin article photo)

Based on the draft circular, the BSP decision in the adjudication will be “final and executory” and a court will have no authority to restrain or set aside this order “except on petition for certiorari on the ground of grave abuse of discretion or lack or excess of jurisdiction of the BSP.”

Once approved by the Monetary Board, the BSP said appropriate mechanisms will be 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,” said the BSP. As such, it assures that the FCPA-compliant rules will protect the rights of financial consumers such as: the right to equitable and fair treatment; right to disclosure and transparency of financial products and services; right to protection of consumer assets against fraud and misuse; right to data privacy and protection; and the right to timely handling and redress of complaints.

In establishing the guidelines and expectations, the BSP-supervised financial institutions (BSFIs) will “institutionalize consumer protection as an integral component of corporate governance and culture as well as risk management.” It will enable BSFIs to manage consumer risks and potential harms to financial consumers, prevent unfair business practices, achieve fair and beneficial consumer outcomes and empower consumers, the BSP added.

The proposed guidelines also includes the formation of a Market Conduct Supervisory Framework, and market conduct surveillance, examination and monitoring.

Each BSFIs must also establish proper and adequate disclosure and transparency policy, fair treatment, and the privacy and protection of client data.

BSFIs will also have single consumer assistance mechanism or the Financial Consumer Protection Assistance Mechanism or FCPAM for free, commensurate to the size, structure, nature of products, services, and complexity of operations, said the BSP. This will pay particular focus on the protection of consumer assets against fraud and misuse.

Once the proposed circular is adopted, BSFIs will be given a six-month transitory period to do the following: perform a gap analysis of their current consumer protection practices vis-à-vis the provisions of the new circular; and propose an action plan duly approved by the Board of Directors to achieve full compliance within a reasonable period of time but in no case longer than one year from the effectivity of circular.

The BSP is currently circulating the draft circular. BSFIs are asked to submit feedback or recommendations by July 8.

Outgoing BSP Governor Benjamin E. Diokno strongly believes that the FCPA will improve and strengthen the public’s trust and confidence in the financial sector. The FCPA, which was one of BSP’s priority legislative agenda, was signed into a new law last May 6.

The FCPA will empower financial regulators such as the BSP, Securities and Exchange Commission, Insurance Commission and the Cooperative Development Authority to effectively exercise rulemaking, enforcement and adjudication powers in line with their consumer protection mandates. FCPA also has penal provisions for violations of the law.

Without the FCPA, the BSP’s complaints’ resolutions process is constrained due to the central bank’s limited legal authority to adjudicate.

In 2021, the BSP processed almost 10,000 consumer complaints with a value of P540 million.

Including the pre-Covid 2019 period and when the pandemic was declared in 2020, the BSP has received and processed about P2 billion-worth of consumer complaints in the last three years.

For both the pandemic years of 2020 and 2021 only, the BSP processed 42,456 complaints. These are customer complaints against banks, non-banks, e-money issuers, operators of payment system, among others.

The use of increased digitalization during the pandemic has also brought with it “graver risks” since complaints related to the use of internet banking and mobile banking accounted for 45.2 percent of the total complaints received by the BSP last year.