The Philippines' Securities and Exchange Commission (SEC) is proposing to require third-party debt collection agencies to secure accreditation before collecting debts on behalf of financing and lending companies.

The corporate regulator said on Friday that it released for public comment on Sept. 30 a draft memorandum circular covering the accreditation, disclosure, and oversight of third-party collection agencies (TPCAs) engaged by financing and lending companies.

Under the draft rules, only SEC-accredited TPCAs — apart from the internal collection agents of financing and lending companies themselves — would be permitted to conduct debt collection activities.

The proposal defines TPCAs as stock corporations registered with the SEC that are engaged by financing and lending companies to provide debt collection services.

“The draft rules aim to establish a regulatory framework that will bring TPCAs under the Commission's direct supervision and set uniform standards of conduct for debt collection to better protect borrowers from abusive collection practices,” the SEC said. The draft circular builds on SEC Memorandum Circular No. 18, Series of 2019, which addresses unfair debt collection practices, by extending the Commission's direct oversight to the third-party agencies themselves rather than only the financing and lending companies that engage them.

TPCAs seeking accreditation would be required to submit applications through the SEC's online system. Accreditation would remain valid for three years, and approved agencies would be included in a publicly available registry maintained by the Commission — a list borrowers could consult to confirm whether a collection agency holds current accreditation.

An accredited TPCA may apply for renewal at least 30 days before its accreditation expires. Under the draft rules, failure to renew on time could result in monetary fines.

The SEC could also remove a TPCA from the registry if its Financing and Lending Companies Department finds the agency liable for unfair debt collection practices under SEC Memorandum Circular No. 18, Series of 2019.

Final decisions or resolutions in administrative or criminal cases against a TPCA, as well as material, serious, repeated, or willful violations of the proposed circular, related SEC issuances, or applicable laws and regulations, could likewise serve as grounds for delisting. TPCAs may also request voluntary removal from the registry.

Under the proposal, TPCAs found to be involved in unfair debt collection practices — including unlawful house visits and the use of system-generated and automated messages — could face fines ranging from P60,000 to P200,000. A fourth offense could result in delisting and revocation of the agency's accreditation.

The SEC could also blacklist the directors and officers of TPCAs delisted for unfair debt collection practices or material misrepresentation.

Financing and lending companies, for their part, could face fines of as much as P2 million for fraudulently engaging non-accredited or undisclosed TPCAs. A fourth violation could result in the suspension or revocation of the company's certificate of authority and, in exceptional cases, revocation of its articles of incorporation.

The SEC is accepting public comments on the proposed rules until Oct. 15 through a designated online form. How the Commission weighs those submissions — and whether it finalizes the draft as written or with revisions — will shape the accreditation framework under which TPCAs and the financing and lending companies that engage them would operate.

— Alexandria Grace C. Magno, BusinessWorld

Source: BusinessWorld