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Lender loses license due to abusive practices

/ 04:11 AM July 07, 2021

The Securities and Exchange Commission (SEC) has stripped Familyhan Credit Corp. of the authority to operate as a lending company, citing unfair debt collection practices and failure to disclose true lending rates.

The SEC revoked the certificate of authority of Familyhan after uncovering three counts of violation of SEC Memorandum Circular No. 18, Series of 2019 (SEC MC 18), which prohibits unfair debt collection practices, as well as eight counts of violation of the Truth in Lending Act (Tila) or Republic Act No. 3765.

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Familyhan violated the prohibition on unfair debt collection practices when it contacted persons in the debtor’s contact list other than those named as guarantors or comakers of the loan agreement, according to the SEC’s Corporate Governance and Finance Department (CGFD).

“Notwithstanding the borrower’s consent, contacting the persons in the borrower’s contact list other than those who were named as guarantors or comakers shall also constitute unfair debt collection practice,” the CGFD explained, citing Section 1(h) of SEC MC 18.

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Whether or not contacting third parties in the borrower’s contact list had been the standard operating procedure of Familyhan prior to the issuance of SEC MC 18, the company had sufficient time to change such collection practices the moment this was prohibited by the memorandum circular, the CGFD noted.

Complaints

SEC MC 18, which took effect in 2019, was issued as part of the SEC’s response to mounting complaints about unreasonable, abusive and unfair practices of some lending and financing companies.

Familyhan likewise violated guidelines of the Tila when it failed to disclose fine prints of the loan, the regulator said.

“[I]t is clear that the net proceeds of the loan is one of the minimum information that needs to be disclosed by a creditor to its borrower,” the CGFD said. “Thus, missing such information, Respondent cannot contend that they have duly complied or substantially complied with the Tila.”

The SEC had issued a memorandum circular in 2011 to implement the Tila provided under Bangko Sentral ng Pilipinas (BSP) Circular No. 730, Series of 2011, to enhance transparency in loan transactions and prevent the uninformed use of credit.

The BSP requires lenders to disclose to all types of borrowers the loan terms, including the total amount to be financed, finance charges, net proceeds of the loan and the percentage that the finance charge bears to the total amount to be financed, prior to the consummation of the transaction.

Familyhan had filed a motion for reconsideration of the GCFD’s order to revoke its certificate of authority but this was denied for lack of merit by the CGFD in a resolution dated June 18.

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Monitoring

The SEC vowed to continue monitoring lending and financing companies for compliance with applicable laws, rules and regulations.

So far, the SEC has canceled the licenses of 35 financing and lending companies due to various violations of applicable rules and regulations. The SEC has also revoked the certificate of registration of a total of 2,081 lending companies for their failure to secure the requisite certificate of authority, pursuant to the Lending Company Regulation Act of 2007.

Moreover, 58 online lending firms had been ordered to cease operations for lack of authority to operate as a lending or financing company.

—Doris Dumlao-AbadilLa inq
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TAGS: Business, Securities and Exchange Commission (SEC)
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