SEC En Banc Case No. 07-21-486Familyhan Credit Corporation, Appellant vs. Corporate Governance and Finance Department, Appellee

Securities and Exchange Commission Republic of the Philippines Department of Finance

COMMISSION EN BANC

FAMILYHAN CREDIT CORPORATION, Appellant.

- versus - SEC En Banc Case No.07-21-486

CORPORATE GOVERNANCE AND FINANCE DEPARTMENT, Appellee.

DECISION

2021 (the Appeal) filed by Appellant Familyhan Credit Corporation (Familyhan assailing the Resolution dated 18 June 2021 (theAssailed Before the Commission is the Memorandum of Appeal dated 5 July

Resolution issued by the Corporate Governance and Finance Department (CGFD) which denied its Motion for Reconsideration and affirmed CGFD

Familyhan's Certificate of Authority to Operate as a Financing Company, the dispositive portion of which reads: Order No. 29, Series of 2021 (the Assailed Order) revoking Appellant

"WHEREFORE, in view of the foregoing, the Certificate of Authority to Operate as a Lending Company of Familyhan Credit Corporation (CA No.1692) is hereby REVOKED.

SO ORDERED

THE RELEVANT FACTS

issued CA No. 1692 by the Securities and Exchange Commission on 20 known as the Financing Company Act of 1998 (FCA), as amended.It was February 2015. financing company as defined under Republic Act No. 8556, otherwise under the laws of the Republic of the Philippines, having been incorporated On 20 February 2015 with the issuance of SEC Registration No. CS201503145 under its name. It is authorized to engage and operate as a Appellant Familyhan is a corporation duly organized and existing

From the months of April to July of 2020, the CGFD received complaints from Mses. Jessica Sumpio (Ms. Sumpio), Daryll Fe Chavez

Familyhan Credit Corporation vs. CGFD SEC EB Case No. 07-21-486 Page 2 of 16

Pardo Ms. Pardo, and Marissa Portuguez Ms. Portuguez) against Appellant Familyhan for alleged violations of SEC Memorandum Circular No.18, Series of 2019 (SEC MC 18) on the Prohibition of Unfair Debt

alleged that Appellant Familyhan carried a collection scheme where it Collection Practices of Financing and Lending Companies. The complaints

actually contacted persons related to its borrowers who were not the named guarantors or co-makers and informed them about the loan, and/or threatened

not made within prescribed period. Acting on these complaints, and after borrowers that their contact list will be informed about the loan if payment is

Appellant Familyhan to show cause why it should not be held liable for investigation where the CGFD initially found possible violation of Section 1h) of SEC MC 18,Show Cause Letterswere issued by the CGFD directing

violating SEC MC 18.

20203 to the Show Cause Order on the complaint of Ms. Pardo, alleging therein that it had no control over the actions of its collectors/agents and Appellant Familyhan filed its Letter-Response dated 23 November

should therefore not be held liable for the latter's conduct. The CGFD noted Appellant Familyhan's failure to provide any evidence showing that it did not use sensitive personal information of its borrower(s), and found the explanation proffered by Appellant Familyhan to be without merit, which resulted in the imposition of the appropriate penalty for its first violation of SEC MC 18.

The records show that Appellant Familyhan failed to file a response to

CGFD proceeded to impose the appropriate penalty for its second violation of the Show Cause Order covering the complaint of Ms.Sumpio.Consequently SEC MC 18.

that it could not have violated SEC MC 18 because its act in contacting a Order covering the complaint of Ms. Portuguez, Appellant Familyhan argued person in the borrower's list was resorted to after it allegedly became evident In its Letter-Response dated 12 December 20204 to the Show Cause

that the borrower made herself deliberately unavailable. Appellant Familyhan put up the defense that the said act was intended to remind the borrower of her obligation to pay the loan and to get in touch with it.The CGFD however found Appellant Familyhan's justification to be without merit and imposed the appropriate penalty for its third violation of SEC MC 18.

as the Truth in Lending Act (TILA), in relation to SEC Memorandum Circular Familyhan for alleged violation of Republic Act No.3765,otherwise known The CGFD also received other complaints5 against Appellant

5 Annexes "H" _ "O", CGFD Comment. 2 Annexes "A-1", "B-1", and "C-1", CGFD Comment. Annex Familyhan Appeal. 4 Ibid. AnnexesACCGFD Comment

Familyhan Credit Corporation vs. CGFD SEC EB Case No.07-21-486 Page 3 of 16

No.7, Series of 2011 (SEC MC 7) or the Implementation of the Truth in Lending Act to Enhance Loan Transaction Transparency from the following persons: Mses. Lei-Ann G. Anical (Ms. Anical, Glorifer I. Navea (Ms Navea), Cristina Lapay (Ms. Lapay), Mylene Marimon (Ms.Marimon Florpis E.Jacutin (Ms.Jacutin),Juvy Mata (Ms.Mata), Jennifer Abarra(Ms.

Appellant Familyhan failed to provide them with a copy of the disclosure statement and/or loan agreement. Abarra), and Corazon A.Fernandez (Ms.Fernandez), who all alleged that

Schedules provided to and signed by its borrowers prior to the consummation to the same, and to show proof that it complied with the provisions of the of the transaction. Letters which directed Appellant Familyhan to submit its Comment/Answer TILA by submitting copies of the Disclosure Statements and Amortization The CGFD acted on the said complaints by issuing the corresponding

where the borrower is required to affix his/her electronic signature after having read the contents of the said document. informed of the following details, through phone call: (a) the installment amortization amount which includes the principal and interest, and installment dates; (b) the total interest of the loan;(c) the acceptance fees which is equivalent to 10% of the principal loan;(d the late payment fee;and application for loan is processed and acted upon, all potential borrowers are loan document is given to each of its borrower through a link sent via e-mail (e) the remittance charge. Appellant Familyhan also alleged that a copy of the In its Comments,7 Appellant Familyhan alleged that before an

company and manifested that her client, Appellant Familyhan, will be relevant laws. above complaints which was attended by Appellant Familyhan's counsel. draft disclosure statement or authorization, discussed the operations of the implementing the revised loan documents that will show compliance with all Atty. Jennylyn R. Ojano-Sabado, who presented a copy of her client's new On 30 July 2020, the CGFD conducted a conference in relation to the

proceeded to impose the corresponding penalties for violation of SEC MC 7. found no merit in the arguments of Appellant Familyhan and forthwith loan agreements) that were submitted in evidence did not include/provide for the net proceeds of the loan as received by its borrowers. The CGFD thus Familyhan's claim that it substantially complied with the provisions of the TILA to be without merit because the amortization schedules (attached to the During the conduct of its investigation, the CGFD found Appellant

Annexes S-2, T-2,U-2, V-2, W-2, X-2, Y-2, and Z-2, CGFD Comment. Annexes H-1I-1,J-1,K-1L-1,M-1N-1, and O-1, CGFDComment.

Familyhan Credit Corporation vs. CGFD SEC EB Case No. 07-21-486 Page 4 of 16

committed which were all admitted by the latter as evidenced by its payment Considering the multiple violations that Appellant Familyhan has

of the various penalties imposed against it8,the CGFD issued a Formal Charge against Appellant Familyhan on 15 February 2021 for violation of SEC MC 18 and TILA,in relation to SEC MC7, in accordance with Rule III,Part II of the 2016 Rules of Procedure of the Commission (2016 SEC Rules) and directed it to explain why its CA should not be revoked in view of its multiple violations of the TILA and MCs issued by the Commission implementing the same.

On 4 March 2021,Appellant Familyhan filed its Verified Answer(the "Answer") to the formal charge therein praying for the dismissal of the Formal Charge for alleged lack of merit. In its Answer, Appellant Familyhan insisted that the CGFD failed to issue the appropriate formal charges in relation to the complaints of Mses. Sumpio, Pardo, Anical, allegedly fatal, arguing that the same condition precedent for a valid Navea, and Lapay which is

decision under the 2016 Rules of Procedure Commission (theRules Appellant Familyhan also argued that it did not of the Securities and Exchange

violate the TILA because it furnished its borrowers copies of the terms and conditions of their respective loans prior to its consummation.

On 13 April 2021, the CGFD issued the Assailed Order revoking Appellant Familyhan's CA for multipl violations of SEC MC 18 and the TILAin relation to SEC MC sailed Order,the CGFD pointed out and showed proof that the were issued to Appellant Familyhan contained suffic ient gations on the violations that duly informed the latter of the natu charges brought against it. The CGFD also alleged that Appellant Familyhan insistence that the CGFD violated the

relation to proceedings involving lending and financing companies.io Rules is without basis as the Commission has suspended its application in

The Motion for Reconsiderationll filed by Appellant Familyhan on 26 April 2021,which reiterated the arguments that it raised in its Verified Answer was denied by the CGFD for lack of merit. Hence, the instant Appeal.

On 26 July 2021, the CGFD filed its Comment/Opposition [To

praying that the Appeal be denied for alleged lack of merit, and the Assailed Memorandum of Appeal dated 5 July 2021] (theComment/Opposition") Resolution be affirmed in full.

See Annexes FDDEE Annex "9", Appeal. I1 Annex "10", Appeal. 10 See last paragraph of the Assailed Order (page 6)

Familyhan Credit Corporation vs. CGFD SEC EB Case No. 07-21-486 Page 5 of 16

ISSUE

Appellant Familyhan on the basis of a finding of violation of SEC MC 18. Whether the CGFD committed reversible error in revoking the CA of

and the Truth in Lending Act, in relation to SEC MC No.7, Series of 2011.

RULING

The Commission affirms the Assailed Resolution and sustains the revocation of the CA of Appellant Familyhan.

I Appellant Familyhan was not

denied of its right to due process.

At the outset, the Commission notes that Appellant Familyhan basically reiterated in its Appeal, the arguments and allegations in the pleadings that it filed with the CGFD. Appellant Familyhan maintains that the Assailed Resolution which sustained the revocation of its CA is infirm because the CGFD merely issued Show Cause Orders with respect to the complaints of Mses. Sumpio, Pardo, Anical, Navea, and Lapay, instead of Formal Charges which is allegedly required under Tae Rules. Moreover,Appellant Familyhan argues that the CGF ommitted reversible error in taking cognizance of the complaints. 0f Ms. MaTa Navea, Jacutin, Abarra Marimon, and Fernandez which have thus been denied due course Appellant Familyhan is in effect arguing all allegedly unverified, and should

that the revocation of its CA by the CGFD should be reversed by the Commission as the same was allegedly made in violation of its right to due process.

In its Comment/Opposition, the CGFD argued that Appellant

the Rules was misplaced on the ground that the Commission specifically Familyhan's reliance on the alleged non-compliance with the provisions of

lending and financing companies. Appellee CGFD also claimed that despite issued a Resolution suspending its application to proceedings involving

the non-applicability of the Rules, Appellant Familyhan was nonetheless afforded its right to administrative due process.

We agree with the Appellee CGFD.

Section 1-5, Rule I, Part I of the Rules states:

12 See Par. 23 of the Appeal 13 See Pars. 29 and 32 of the Appeal

Familyhan Credit Corporation vs. CGFD SEC EB Case No.07-21-486 Page 6 of 16

interest of justice and in order to best serve public interest, the Commission "Section I-5. Suspension of Rules in Exceptional Cases. - In the broader

may, in any particular matter, exempt it from these Rules in exceptional judicious disposition of cases." cases and apply such suitable, fair,and reasonable procedure to improve the delivery of public service and to assist the parties in obtaining a speedy and

Pursuant to the afore-quoted provision of the Rules, the Commission issued SEC Resolution No.781A, Series of 2019(the Resolution 781A), suspending the application of the Rules in all actions and proceedings covering lending and financing companies to promote public interest, to wit:

"SEC Resolution No. 781A, Series of 2019

reportorial and other compliance requirements, and all other rules and regulations implemented by the Commission, such issue being of exceptional character and of public interest.(Emphasis supplied serve public interest, TO SUSPEND the implementation of the 2016 Rules) in accordance with Part I, Rule I, Section 1.5 thereof, in connection Company Act of 1998 (R.A.8556) and its Implementing Rules and Regulations; the Truth in Lending Act R.A.3765;SEC MC 18; RESOLVED, That in the broader interest of justice, and in order to best Rules of Procedure of the Securities and Exchange Commission (2016 with the administrative actions of the Corporate Governance and Finance Department against financing companies and lending companies that are subject of several complaints from the public, and those that are violating the Lending Company Regulation Act of 2007 (R.A. 9474) and its Implementing Rules and Regulations; the Financing

Considering that Appellant Familyhan is a corporation engaged in the business of operating a lending companyl4,the Resolution 781A is applicable in the instant case and was thus correctly invoked by the CGFD in dispensing with the issuance of a formal charge for each of the complaint that was filed with it.

number of lending and financing companies have employed unfair debt collection practices with impunity especially during the pandemic, which The Commission takes administrative notice that a considerable

resulted in the filing of numerous complaints against certain lending and

issuance of Resolution 781A which was intended to promote the integrity of financing companies, including Appellant Familyhan. This justified the

the lending/financing sector, and to protect/safeguard the sensitive personal

Commission. information of persons, which is a power expressly granted to the

Moreover, it should be emphasized that the proceedings in the instant case, being administrative in nature, is not required to strictly adhere to the technical rules prescribed in judicial proceedings, and the decisions need only

I4 Paragraph 1, Appeal.

Familyhan Credit Corporation vs. CGFD SEC EB Case No. 07-21-486 Page 7 of 16

to be based on substantial evidence. This established rule was reiterated by the Supreme Court in Magcamit vs Internal Affairs Service - Philippine Drug Enforcement Agencyl5, to wit:

rules of procedure and evidence are relaxed in administrative proceedings in order "to assist the parties in obtaining just, speedy and inexpensive coming up with a decision." (Emphasis supplied) quasi-judicial; there is no requirement for strict adherence to technical determination of their respective claims and defenses. By relaxing technical rules, administrative agencies are, thus, given leeway in Administrative determinations of contested cases are by their nature rules that are observed in truly judicial proceedings. As a rule, technical

Nonetheless, as correctly pointed out by Appellee CGFD, the relaxation of the technical rules of procedure pursuant to Resolution 781A. did not mean that Appellant Familyhan was likewise deprived of its day in court because the evidence on record shows that the latter was fully informed of the complaints filed against it when it was issued the relevant Show Cause Orders/Letter-Orders which afforded Appellant Familyhan the opportunity to refute the allegations of violation and/or present its defense. More importantly, the records of the case show that Appellant Familyhan submitted its letter-replies to the Show Cause Orders/Letter-Orders,actively participated

conducted by the CGFD, and filed a Motion for Reconsideration on the in the proceedings as evidenced by its attendance in the conference(s)

Assailed Order which was acted upon by the CGFD. These factual circumstances negate the claim of Appellant Familyhan that it was denied due process. These factual circumstances establish CGFD's compliance with the requirements of due process. In this regard, the doctrine established in the case of Vivo vs PAGCOR1 is very apt, to wit:

reconsideration of the action or ruling complained of. Administrative due heart of procedural due process. The essence of due process is to be heard. and, as applied to administrative proceedings, this means a fair and reasonable opportunity to explain one's side, or an opportunity to seek a process cannot be fully equated with due process in its strict judicial sense technical rules of procedure are not strictly applied. Ledesma v. Court of Appeals elaborates on the well-established meaning of due process in "The observance of fairness in the conduct of any investigation is at the very for in the former a formal or trial-type hearing is not always necessary, and administrative proceedings in this wise:

is satisfied when a person is notified of the charge against him and in all situations require a trial-type proceeding. Due process x x x Due process, as a constitutional precept, does not always

reasonable opportunity for the person so charged to answer the and given an opportunity to explain or defend himself. In administrative proceedings, the filing of charges and giving

16 G.R.No. 187854,November 12, 2013. See also Palao vs.Florentino International, Inc.G.R.No. 186967, 15 G.R. No. 198140, January 25, 2016 January 18, 2017.

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opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or ruling complained of." accusations against him constitute the minimum requirements of due process. The essence of due process is simply to be heard, or as applied to administrative proceedings, an (Emphasis supplied)

I. Appellant Familyhan violated

SEC MC 18,and the TILA in relation to SEC MC 7

In its Appeal, Appellant Familyhan maintained that it did not violate the cited law and regulations, arguing that, in relation to the TILA, it allegedly complied with its provisions because complainants were provided with all the required information which are contained in page 4 of the respective loan agreements.As for the SEC MC 18,Appellant Familyhan claimed that the

on their whereabouts. These are the arguments that Appellant Familyhan are for the purpose of embarrassing/harassing the latter, but primarily to inquire presenting to this Commission in support of its conclusion that it did not sending of demand letters to persons other than the borrowers were made not

violate SEC MC 18 and the TILA in relation SEC MC 7.

The Commission is not convinced.

Section 1 (h) of SEC MC 18 provides:

application of the foregoing, the following conduct shall constitute them may resort to all reasonable and legally permissible means to collect of their rights and performance of their duties, they must observe good unscrupulous and untoward acts. Without limiting the general collection practices, which shall be subject to the penalties provided Section 1.Unfair Collection Practices.-FCs,LCs,and TPSPs hired by amounts due them under the loan agreement, provided that, in the exercise faith and reasonable conduct and refrain from engaging in

herein:

X X X

h. Notwithstanding the borrower's consent, contacting the person in the borrower's contact list other than those who were named as guarantors or co-makers shall also constitute unfair debt collection practice. (Emphasis supplied)

in the borrower's contact list, regardless of the intent and purpose of the reason for this is that SEC MC 18 and the very law that it is implementing i.e. lending or financing company, constitutes unfair debt collection practice. The R.A.No. 8556 (the Financing Company Act) and R.A.No. 9474 (the The afore-quote provision is clear that the act of contacting the person

Lending Company Regulation Act of 2007 are special laws, the acts that

Familyhan Credit Corporation vs. CGFD SEC EB Case No. 07-21-486 Page 9 of 16

are prohibited and/or offenses set forth therein are considered mala prohibita which means that the commission of the prohibited act is punishable.17

On the other hand, in implementing the provisions of the TILA, SEC MC 7 provides that:

"The Commission, in its commitment to protect the uniformed use of credit R.A.3765 requiring full disclosure of the true cost of credit, resolved in its en banc meeting on 18 August 2011 to adopt Circular No.730 dated by borrowers or users and in compliance with the Truth in Lending Act

implementing the Truth in Lending Act to enhance loan transaction transparency."(Emphasis supplied) 20 July 2011 of the Bangko Sentral ng Pilipinas (BSP) on updated rules

Relative thereto, the pertinent provisions of BSP Circular No.730 dated 20 July 2011BSP Circular 730)states:

"Section 3. Information to be disclosed

Subsection X307.2, MORB is hereby amended to read as follows:

bedisclosedtoall types ofborrower.Forsmall business/retail/consumer credit, the following are the minimum information to be disclosed (sample form in Appendix 19): $X307.2 Information to be disclosed. As a general rule, loan terms shall

be financed expressed as a simple annual rate or an effective annual also be quoted as a monthly rate in parallel with the quotation of the b. The finance charges expressed in terms of pesos and centavos; d. The percentage that the finance charge bears to the total amount to interest rate (EIR) as described in item h of Subsection X307.1.EIR may a. The total amount to be financed; c.The net proceeds of the loan; and

contractual rate.

Banks are required to furnish each borrower a copy of the disclosure supplied statement, prior to the consummation of the transaction." (Emphasis

adequately inform its borrowers of the terms of their loans in the simplest BSP Circular 730 clearly provides that that the lender is obligated to

terms possible, without requiring the latter to perform any other act or calculation to know the intended information or value. The objective of the law, and the related rules and regulations, will be rendered nugatory if the said

the nuances of the matters contained therein. By making such information responsibility is passed on the borrower who may not be knowledgeable on

known to the borrowers by the lenders themselves, complete transparency is

consciously.(Tigoy v. Court of Appeals, G.R. No.144640, [June 26,2006], 525 PHIL 613-624 17 In offenses considered as mala prohibita or when the doing of an act is prohibited by a special law such has the intent to perpetrate the act prohibited by the special law, and that it is done knowingly and as in the present case, the commission of the prohibited act is the crime itself. It is sufficient that the offender

Familyhan Credit Corporation vs. CGFD SEC EB Case No.07-21-486 Page 10 of 16

realized. This protects not only the borrowers from unscrupulous practices of merchants, but also the latter by denying abusive borrowers the convenient excuse of allegations of fraud and deceit perpetrated by the lenders.

After a careful examination of the evidence on record, the Commission agrees with the CGFD that Appellant Familyhan's loan contracts do not state the net proceeds of the loan such that its borrowers have to manually determine the net proceeds of their respective loan agreements. In fact, this violation which is a consequence of Appellant Familyhan's failure to provide the details required by law in its loan contracts, was admitted by the Appellant when it stated that "a simple mathematical computation would already give Respondent's borrowers the exact figures of their net proceeds".18 This is a violation of the afore-quoted provisions.

More importantly, the violations that were found by CGFD to have been committed by Appellant Familyhan were based not only on substantial evidence,but on the clear admissions of Appellant Familyhan itself.

The Commission cannot ignore the fact that Appellant Familyhan expressly admitted having violated SEC MC 18 for which reason, it is now seeking leniencyl9 and arguing that the penalty of revocation of its CA was excessive considering that it was burdened stubborn employees who had the penchant for violating rulations issued by the Commission20 . Relative theret notes that Appellant

and affirmed the correctness of the Assailed Resolution which sustained the MC 18 and TILA in relation the assessed penalties. These admissio Familyhan accepted the previou cemented the findings of the CGFD he CGFD that it violated SEC evidenced by its payment of

penalty of revocation of its CA.

Familyhan are considered judicial admissions which established the Moreover, it bears emphasis that the admissions made by Appellant

violations subject of the instant case. In Gonzales-Saldana vs Niamatali21, the Supreme Court explained the legal effect of judicial admissions, to wit:

party in the course of the proceedings in the same case, which dispenses "A judicial admission is an admission, verbal or written, made by a with the need for proof with respect to the matter or fact admitted. It may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.

judicial admissions are a waiver of proof; production of evidence is A party who judicially admits a fact cannot later challenge [the] fact as

1 See Subtitle B (Respondent is entitled to leniency over its violations of MC18-19), pars. 36-43 of the 18 Paragraph 43, Verified Answer 20 See par. 55 of the Appeal 21 G.R. No. 226587, November 21, 2018 Appeal

Familyhan Credit Corporation vs. CGFD SEC EB Case No.07-21-486 Page 11 of 16

the field of controversy. Consequently, an admission made in the dispensed with. A judicial admission also removes an admitted fact from

pleadings cannot be controverted by the party making such admission and is cannot be controverted by the party making such admission and

inconsistent therewith should be ignored, whether objection is conclusive as to such party, and all proofs to the contrary or S interposed by the party or not. The allegations, statements or pleader. A party cannot subsequently take a position contrary to or admissions contained in a pleading are conclusive as against the inconsistent with what was pleaded. (Emphasis supplied)

On the basis thereof, the Commission hereby sustains the finding of

Familyhan. violation of SEC MC 18 and the TILA in relation to SEC MC 7 by Appellant

I. The CGFD correctly imposed

the penalty of revocation of Appellant Familyhan's CA for multiple violations of SEC MC 8 and the TILA, in relation to SEC MC 7.

In its Appeal, Appellant Familyhan maintains that the CGFD committed reversible error in revoking its CA, arguing that the attendant circumstances in the instant case allegedly justify affording leniency to it

Familyhan alleged that the acts complained of which violated SEC MC 18 which allegedly rendered this penalty excessive.In support thereof, Appellant

were made only because it was imperative for it to collect the amounts due to

however insists that the penalty of revocation of its CA is excessive because the company to ensure continued business operations. Appellant Familyhan

the CGFD allegedly failed to consider (a) its efforts in complying with the relevant laws, rules and regulations which it allegedly implemented in its operations through memoranda, and the conduct of relevant trainings22, and

obligations compelled it to secure the services of counsel to ensure collection of loans. (b) the reality that unscrupulous borrowers who allegedly defaulted in their

The Commission cannot accede to Appellant Familyhan's position and arguments.

violation of its provisions, and in case of third violation, grants the based on the facts, gravity and seriousness of the offense, thus: Commission the discretion to suspend or revoke the CA of the erring company Section 5 of SEC MC 18 provides for the applicable penalties for

22 See Pars. 53 and 54 of the Appeal

Familyhan Credit Corporation vs. CGFD SEC EB Case No. 07-21-486 Page 12 of 16

"Sec.5.Applicable Penalties.-Violation of this Circular shall subject FCs and LCs to the following penalties:

Third Offense: Subject to the facts, circumstances and gravity of the offense, the Commission, at

its discretion,may impose a Fine of not less than twice the fine for the second offense but not more than P1 Million (1,000,000) Pesos; or Suspension of lending and financing activities for a period of sixty (60 days; or Revocation of Certificate of Authority to operate as a Financing or Lending Company as appropriate for each circumstance.' (Emphasis supplied)

The word "shall" in the afore-quoted provision was intentionally used

of 1998 and/or the Lending Company Regulation Act of 2007 which it seeks to ensure that any act or omission that violates the Financing Company Act

to implement is administratively sanctioned/p /penalized, to ensure that integrity of the financing business/industry which is imbued with public interest is not compromised. However, in the erci bower and authority to penalize,the Commission iscretion impose the appropriate penalty/sanction which T0G0 the word or". The concept of discretion and the valid exerci thereof was explained by the Supreme Court in Sanson vs Barrios23, to wit:

impropriety of the act done. If the law imposes a duty upon a public officer, "Whenever a statute gives discretionary power to any person, to be exercised by him upon his own appreciation of certain facts, such statute constitutes him the sole judge of the existence of those facts. Discretion, when applied to public functionaries, means a power or right conferred upon them by law of acting officially, under certain purely ministerial act or duty, in contradistinction to a discretional act, is prescribed manner, in obedience to the mandate of legal authority, without and gives him the right to decide how or when the duty shall be performed, when the discharge of the same requires neither the exercise of official circumstances, according to the dictates of their own judgments and consciences, uncontrolled by the judgments or consciences of others. A one which an officer or tribunal performs in a given state of facts, in a regard to or the exercise of his own judgment, upon the propriety or such duty is discretionary and not ministerial. The duty is ministerial only discretion nor judgment." (Emphasis supplied)

Familyhan's reliance in Marbel Institute of Technical College vs Lubaton24 in In relation to the imposition of the appropriate penalty(ies), Appellant

support of its position that revocation is not warranted because all remedies

23 G.R. No. L-45086, July 20, 1936 24 Par. 52 of the Appeal (SEC Case No. 05-09-0336, October 18, 2016)

Familyhan Credit Corporation vs. CGFD SEC EB Case No.07-21-486 Page 13 of 16

have to be exhausted as a condition precedent for its imposition, is misplaced. In the first place,the principle in the cited case applies to cases involving the revocation of the primary license of a corporation and not the secondary license, as what happened in the instant Section 5 of SEC MC 18 that prohibit s the case. Secondly, there is nothing in mmission from imposing the penalty of revocation of the CA violated the circular the third time, especially if, in 1S e circumstances the nature and the gravity Had SEC MC 18 intended to impose the penalty afte th enalt y of fine or suspension has been meted aThosanme clearl stated therein The fundamental rule in statutor nstruction is that if the statute is clear.

without interpretation.25 plain and free from ambiguity, it must be given its literal meaning and applied

or financing companies who violate the law, rules, and regulations is justified The grant of authority to the Commission to revoke the CA of lending

by the fact that a license is a mere privilege, and the enjoyment thereof is conditioned on the grantee's full and continued compliance with applicable laws and regulations. In Oposa v. Factoran, Jr.26, the Supreme Court held that a license may be validly withdrawn at any time if public interest and public welfare requires the same:

protected by the due process clause of the Constitution. In Tan vs. Director of Forestry, this Court held: "Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract, property or a property right

regulates the utilization and disposition of forest resources to the end that public welfare is promoted. A timber license is not a A timber license is an instrument by which the State

contract within the purview of the due process clause: it is onl a license or privilege, which can be validly withdrawn whenever dictated by public interest or public welfare as in this case.

'A license is merely a permit or privilege to do what otherwise federal, state, or municipal, granting it and the person to whom it is granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation'(37 C.J. 168. Thus, would be unlawful, and is not a contract between the authority, this Court held that the granting of license does not create irrevocable rights, neither is it property or property rights People vs. Ong Tin,54 O.G.7576.(Emphasis supplied)

contact list other than those who are named as guarantors or co-makers, and prohibits financing and lending companies from contacting the borrower's It should be emphasized that Section 1(h) of SEC MC 18 categorically

25 Republic vs Lacap, (G.R. No. 158253, March 2, 2007) 26 G.R. No. 101083, [July 30, 1993])

Familyhan Credit Corporation vs. CGFD SEC EB Case No.07-21-486 Page 14 of 16

SEC MC 7 requires financing and lending companies to disclose the net proceeds of the loan to all borrowers. These circulars which implement the Financing Company Act of 1998 and the Lending Company Regulation Act

of financing and lending companies, just like other financial institutions, by of 2007, seek to promote and maintain the integrity, stability, and soundness

ensuring, among others, that acts or practices that are prejudicial to the public interest are not countenanced.

In the instant case, the records show that Appellant Familyhan violated aSection 1[h]of SEC MC 18 more than three (3) times,and (b) SEC MC 7 eight(8) times.a fact that 0 videnced by its payment of the monetary penaltie aCCA Relative thereto, the Commission holds that the numbe opellant Familyhan committed indicates and affirms th thereof because it shows a conscious and deliberate of the said circulars which the ommi ement This warrants the revocation of its CA and the Commiss thus sees no compelling reason to disturb the finding and the decision of the CGFD.

it alleged, had a penchant for violating the circulars27, if at all, discloses an Appellant Familyhan's act of passing the blame to its employees who.

operation that has a aoor G0 0a vernance system.This cannot however operate to exculpate Appellant Familyhan from liability under SEC MC 18 and SEC MC 7.To accept and sustain Appellant Familyhan's argument would set a dangerous preceden taa financing or lending company can conveniently set up a defense that its violation of laws, rules, and regulations was due to circumstances beyond its control, and will encourage entities to avoid accountability by hiding behind the unlawful acts/omissions of their officers, employees, or agents.

Bayanihan Law mandates the relaxation by the relevant government agencies, Finally, Appellant Familyhan posits that Section 3 (ddd of the

lending companies as a response to the COVID-19 pandemic. including the Commission, in the imposition of penalties against erring

Appellant Familyhan's reliance on, and interpretation of Section 3

states: (ddd) of the Bayanihan Law is misplaced and erroneous. The said provision

"(ddd) Encouraging the BSP and the Securities and Exchange regulatory and statutory restrictions and requirements for a period of banking industry and other financial institutions to extend loans and other forms of financial accommodation to help businesses recover from not more than one (1) year from their date of effectivity to encourage the Commission (SEC) to adopt measures, including the relaxation of

27 See Par. 55 of the Appeal

Familyhan Credit Corporation vs. CGFD SEC EB Case No. 07-21-486 Page 15 of 16

the economic effects of the COVID-19 crisis and to enable the banking industry to manage appropriately its risks and potential losses.

relief to its supervised entities by allowing staggering booking of allowance individuals and business entities affected by COVID-19;(Emphasis for credit losses for all types of credit accommodations extended to supplied) The BSP and the SEC are likewise hereby authorized to grant reporting

The "relaxation of regulatory and statutory restrictions and requirements in the afore-quoted provision means that the BSP and the SEC are directed to come up with, and implement policies, processes and regulations that will facilitate and assist in the continued operations of financial institutions so that they extend loans to businesses and individuals who are in dire need of financial support. This consists, among others, in the extension of deadlines in the filing of reportorial requirements. The "relaxation of regulatory and statutory restrictions and requirements" certainly does not mean the relaxation in implementing Section 1[h] of SEC MC 18 and SEC MC 7 which were intended to protect the public,as alluded to by Appellant Familyhan. The Bayanihan Law will not sanction the relaxation of a regulation that will result in giving premium to and/or encourage abusive and unethical practices by lending or financing companies to justify their continued operation during the pandemic.

hereby DENIED for lack of merit. The Assailed Resolution of the CGFD WHEREFORE, premises considered,the Memorandum of Appeal is

hereby AFFIRMED. which sustained Order No. 29, Series of 2021 revoking Appellant Familyhan's Certificate of Authority to Operate as a Financing Company is

SO ORDERED.

Pasay City, Philippines, 2 November 2021.

EMILIO B.AQUINO Chairperson

W EPHYRO LUIS B. AMATONG JAVEY PAUL D.FRANCISCO

Commissioner Commissioner

Familyhan Credit Corporation vs. CGFD SEC EB Case No. 07-21-486 Page 16 of 16

KELVNLESTER K.LEE Commissioner KARLOS. BELLO Commissioner