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BSP boosts consumer protection for electronic fund transfers
BSP boosts consumer protection for electronic fund transfers
To build trust and confidence in the use of digital payments, the Bangko Sentral ng Pilipinas (BSP) has approved the guidelines for a consumer redress mechanism standards for account-to-account electronic fund transfers (EFT) under the National Retail Payment System (NRPS) Framework.
Based on the new regulation or Circular No. 1195, signed by BSP Deputy Governor Mamerto E. Tangonan on June 1, with the growth of electronic payments and digital payment services, the BSP needs to ensure that BSP supervised institutions (BSIs) with EFTs via the automated clearing houses (ACH) such as InstaPay and PESONet will have to provide the “appropriate and timely consumer recourse mechanisms on issues lodged by consumers' defined industry-wide actions and expectations on clearing switch operators (CSOs)” as well as ACH participants “for the timely resolution of consumer concerns relating to EFTs”.
As defined by the BSP, CSOs refer to the party designated which provides clearing switch services by acting as the operator of payment system to be used by the ACH participants. Meanwhile, EFT is synonymous to electronic payment and is the transfer of funds between two transaction accounts in the same or different BSIs which are initiated and received using electronic devices and channels to transmit payment instructions, said the BSP.
The new regulation will apply to all CSOs and ACH participants providing domestic account-to-account EFTs. This include Person-to-Person (P2P), Person-to-Merchant (P2M), and Person-to-Biller (P2B) payments as per the ACH clearing rules.
“This regulation does not cover dispute resolution involving the delivery of products and/or services underlying the payment transaction,” said the BSP.
There are minimum requirements to implement provisions of the circular, such as notification on EFTs; return of funds; collection and return of EFT fee; disruption of services and operations; and consumer protection.
The circular has a transitory provision and will allow CSOs and ACH participants until Dec. 31, 2024 to “develop the necessary resources to comply” with the new regulation.
Within this period, the BSP expects participants will coordinate with their respective players, the Philippine Payments Management Inc., as well as to work on the “issuance of the revised ACH operating guidelines.”
Last April, the BSP released a draft circular on the rules of market risk management for a more critical and accurate consumer protection measures.
In draft circular, the central bank is proposing the adoption of the Financial Consumer Protection and Market Conduct (FCPMC) Supervision Framework as per the provisions of Republic Act No. 11765 or the “Financial Products and Services Consumer Protection Act” (FCP Act).
The BSP said that essentially, the proposed FCPMC Supervision Framework will assess a BSI’s market conduct risk with a focus on consumer protection.
The proposed circular defines FCP or financial consumer protection market conduct as the manner by which a BSI designs and delivers its financial products and services, and manages its relationship with its clients and the public. Risks, meanwhile, refer to the risk from a BSI’s conduct or business practice that could negatively affect, or cause financial loss or other harm to financial consumers, said the BSP.
The BSP’s planned risk-based supervision approach through the framework will assess a BSI’s business conduct and practices “that pose risk of loss or other harm to financial consumers.”
In addition, the BSP emphasized that the FCPMC Supervision Framework is “distinct and separate” from the BSP Supervisory Assessment Framework (SAFr) that was first adopted in March 2020.
In 2022, the BSP approved new rules to protect the interest of consumers of financial products and services through the effective handling of complaints and disputes through Circular No. 1160, another provision of the FCP Act which was just passed into a law that year.
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 financial transactions. With this power, the BSP can order the reimbursement of a sum of money not exceeding P10 million.