SEC fines HC Consumer Finance for unfair debt collection

The Securities and Exchange Commission (SEC) has fined HC Consumer Finance Philippines, Inc. for engaging in unfair debt collection practices.

In an order dated June 3, the SEC Financing and Lending Companies Department found HC Consumer Finance liable for violation of SEC Memorandum Circular (MC) No. 18, Series of 2019 (MC 18), which prohibits unfair debt collection practices, and MC No. 5, Series of 2023, or the SEC Rules and Regulations of the Financial Products and Services Consumer Protection Act (FCPA) of 2022.

Included in the list of unfair debt collection practices under MC 18 is the contacting of persons in the borrower’s contact list other than those named as guarantors or co-makers. The same act is considered an abusive debt recovery practice under MC 5.

HC Consumer Finance was ordered to pay a P50,000 fine for its first offense, and to stop from collecting debts from individuals who are neither guarantors nor co-makers in a loan. It must also cease and desist from using third-party residences as collection venues.

The Commission also directed the company to review and revise its collection policies and procedures, and submit a compliance report to the SEC.

The case stemmed from a complaint filed by a borrower who claimed that HC Consumer Finance conducted collection activities at a third-party residence occupied by individuals who are not guarantors or co-makers to his loan obligation.

HC Consumer Finance continued its collection activities at the same residence despite written objection from the borrower, according to the complainant.

“The use of a third-party residence as a collection venue necessarily creates a substantial risk that the existence of the debt, the borrower's financial condition, or the fact of delinquency will become known to persons who have no lawful interest in the transaction. Such exposure is precisely what the FCPA, MC 18, and MC 5 seek to prevent,” the order read.
​
“The totality of the evidence on record establishes that [HC Consumer Finance], under the pretext of enforcing a valid obligation, transgressed the clear and non-waivable boundaries imposed by law on the manner of debt collection,” it added.