BSP Circular 1160: Financial Consumer Protection Rules for Banks and E-Money Issuers

BSP Circular No. 1160, Series of 2022, adopts the Financial Consumer Protection Framework that implements Republic Act No. 11765, the Financial Products and Services Consumer Protection Act (FCPA). It amended Part Ten of the Manual of Regulations for Banks and the Manual of Regulations for Non-Bank Financial Institutions in their entirety. The Framework applies to all financial products or services created, developed, offered, or marketed by a Bangko Sentral-Supervised Institution (BSI), and requires each BSI to institutionalize consumer protection as part of corporate governance, culture, and risk management. Its adoption is proportionate to a BSI's asset size, structure, nature of products and services, and complexity of operations.

The five consumer rights the Framework protects

The Framework implements measures to protect five rights of Financial Consumers:

• 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
• Right to timely handling and redress of complaints.

These rights anchor the Consumer Protection Standards of Conduct (Standards) that BSIs must adhere to at all times: disclosure and transparency; protection of client information; fair treatment; effective recourse; and protection of consumer assets against fraud and misuse.

What counts as a BSI and a Financial Consumer

A BSI is a person, natural or juridical, that provides financial products or services under the jurisdiction of the Bangko Sentral. A Financial Consumer or Client is a person or entity, or their duly-authorized representative, who is a purchaser, lessee, recipient, or prospective purchaser, lessee, or recipient of financial products or services of BSIs, including anyone who had or has a current or prospective financial transaction with a BSI.

Financial products or services include deposits, investments, fund transfers, trust products, loans, payments, remittances, and digital financial products or services, as well as products authorized to be cross-sold by BSIs.

Disclosure and transparency: what must be shown before a contract

Under the disclosure and transparency Standard, BSIs must give Financial Consumers a reasonably comprehensive understanding of the products they may acquire. Disclosure must be clear, concise, accurate, understandable, and not misleading.

Sufficient product disclosure must be provided before contracting, covering the type and amount of fees, charges, and interests, and the standard terms and conditions. For digital products, the manner of disclosure should be easily accessible, especially where terms and conditions are deeply embedded and hard to access without scrolling or clicking through multiple screens.

Terms and conditions must clearly state whether interest, fees, charges, and penalties can change over time. Clients must be effectively notified of changes or amendments at least sixty (60) days prior by public notice, unless the Bangko Sentral directs immediate effect or existing rules provide otherwise. Complementary individual notices are required within the same period if the amendments involve fees to be paid or charged on the Client's account. Clients may pre-terminate the contract if they do not agree with significant amendments, or if they fail to receive proper notice of changes.

For more complex products such as investments, key features, costs, and risks must be highlighted in a key facts statement or Product Highlight Sheet (PHS), provided at no additional cost.

Fair treatment and liability for agents

BSIs may select their Clients but must not discriminate on the basis of race, age, financial capacity, ethnicity, origin, gender, disability, health condition, sexual orientation, religious affiliation and practice, or political affiliation. Distinctions may be made when necessary for risk assessment on a specific product or service.

A contractual term is deemed unfair if it exempts or absolves a BSI from acting with skill, care, diligence, or professionalism, or from liability for failing to do so, except where expressly permitted by law. Ambiguities in contractual terms are construed in favor of the Financial Consumer. BSIs are also prohibited from employing abusive collection or debt recovery practices; collection agencies, counsels, and other third-party agents are indispensable parties in complaints involving unfair collection practices.

The BSI is responsible for the acts or omissions of its directors, trustees, officers, employees, or agents in offering, marketing, and transacting with Financial Consumers. It is solidarily liable with its accredited or authorized agents, representatives, or third-party service providers for their acts or omissions in marketing and transacting, which may include debt collection.

Governance: CPRMS and FCPAM

Every BSI must maintain a Consumer Protection Risk Management System (CPRMS) integrated into its enterprise-wide risk management processes and risk governance framework, covering governance structure, policies, processes, and measurement and control procedures. It must also maintain a Financial Consumer Protection Assistance Mechanism (FCPAM).

The Board of Directors is primarily responsible for approving and overseeing the CPRMS, promoting a culture of ethical behavior, approving product oversight and governance mechanisms, and adopting a policy on fees and charges. Senior Management must ensure that approved CPRMS and FCPAM policies are documented and implemented across all levels and business units, and that weaknesses in FCP practices or emerging risks are addressed with corrective action in a timely manner.

Frequently asked questions

Does BSP Circular 1160 apply to e-wallets and digital banks? Yes. The Framework applies to all financial products or services created, developed, offered, or marketed by a BSI, and expressly covers digital financial products or services accessed and delivered through digital channels.

How much notice must a bank give before changing fees or terms? At least sixty (60) days prior to the amendment by public notice, with complementary individual notice within the same period if the change involves fees to be paid or charged on the Client's account, subject to the exceptions stated in the Circular.

Can a bank be held liable for its collection agency's conduct? Yes. The BSI is solidarily liable with its accredited or authorized agents, representatives, or third-party service providers for their acts or omissions in marketing and transacting, including debt collection.

Practical takeaways

• BSP Circular 1160 implements the FCPA and applies to all BSP-supervised institutions and the financial products they offer, including digital ones.
• Five consumer rights are protected: fair treatment, disclosure and transparency, protection of assets against fraud and misuse, data privacy, and timely complaint redress.
• Terms and conditions must be clear and complete, with changes to terms or fees notified at least sixty (60) days prior, subject to stated exceptions.
• Unfair contract terms and abusive collection practices are prohibited, and BSIs are solidarily liable with their authorized agents for marketing and collection conduct.
• Governance obligations rest on the Board and Senior Management through a CPRMS and FCPAM.

Primary sources

The rules discussed above are drawn from the following issuances, embedded here in full for your reference.

Regulations on Financial Consumer Protection to lmplement Republic Act No. 11765, otherwise known as the "Financial Products and Services Consumer Protection Act"Open in Law LibraryDownload PDF

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.