SEC slaps Home Credit Philippines with fine over unfair debt collection practices

The Securities and Exchange Commission (SEC) has imposed sanctions on HC Consumer Finance Philippines, Inc., the company behind Home Credit Philippines, after finding that it engaged in unfair debt collection practices that violated consumer protection rules.

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

According to the SEC, one of the prohibited practices involves contacting individuals listed in a borrower’s phone contacts who are not designated as guarantors or co-makers. The regulator said such actions constitute an unfair and abusive debt recovery practice under existing regulations.

The move underscores the increasing role of technology and data privacy in the financial sector, where digital lending platforms often have access to borrowers’ mobile devices and contact lists.

“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.

HC Consumer Finance was ordered to pay a P50,000 fine for its first offense and to stop collecting debts from individuals who are neither guarantors nor co-makers in a loan.

The company must also cease and desist from using third-party residences as collection venues.

The Commission also directed HC Consumer Finance 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 were not guarantors or co-makers to his loan obligation.

According to the complainant, HC Consumer Finance continued its collection activities at the same residence despite his written objection.