The Securities and Exchange Commission (SEC) has affirmed the revocation of the Certificate of Authority (CA) of Familyhan Credit Corporation to operate as a lending company, after it engaged in unfair debt collection practices by contacting the persons in the debtor’s contact list.
In a decision late last year, the SEC denied the Memorandum of Appeal filed by Familyhan for lack of merit. It then issued the revocation order on April 13, 2021 after finding that Familyhan committed three violations of SEC Memorandum Circular No. 18, Series of 2019, which provides for the Prohibition on Unfair Debt Collection Practices of Financing Companies and Lending Companies.
The company was also found to have committed eight violations of Republic Act 3765, or the Truth in Lending Act (TILA), in relation to SEC Memorandum Circular No. 7, Series of 2011 (MC 7), which outlines the rules on the implementation of the TILA to Enhance Loan Transaction Transparency.
Familyhan filed a motion for reconsideration of the said order, which the CGFD denied for lack of merit in a resolution dated June 18, 2021.
“[T]he Commission holds that the number of violations that Appellant Familyhan committed indicates and affirms the gravity and seriousness thereof because it shows a conscious and deliberate disregard of the provisions of the said circulars, which the Commission is mandated to implement,” the SEC decision read.
“This warrants the revocation of its CA and the Commission, thus, sees no compelling reason to disturb the finding and the decision of the CGFD,” it said.
Familyhan violated the prohibition on unfair debt collection practices when it contacted persons in the debtor’s contact list other than those named as guarantors or co-makers of the loan agreement, according to the SEC.
Meanwhile, Familyhan violated MC 7 when it failed to disclose the net proceeds of the loan to its borrowers.
In its Memorandum of Appeal, Familyhan argued that it complied with the TILA, as the complainants were provided with all required information in their respective loan agreements.
The company also claimed that it did not violate MC 18 when it sent demand letters to persons other than the borrowers, as its purpose was to inquire about the latter’s whereabouts.
The SEC, however, maintained that MC 18 clearly states that the act of “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.”
Likewise, the agency that Familyhan’s loan contracts did not state the net proceeds of the loan to its borrowers, such that they had to manually compute for the net proceeds of their respective loan agreements, violating MC 7 in relation to the TILA.
Further, the SEC noted that Familyhan admitted to having committed the aforementioned violations when it paid their corresponding penalties.
“The grant of authority to the Commission to revoke the CA of lending or financing companies who violate the law, rules, and regulations is justified 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,” the commission ruled.
