The COVID-19 pandemic accelerated the adoption of digital payments in the Philippines, leading to a widespread preference for mobile wallets and card payments even as COVID-19 restrictions eased. With this shift, more Filipinos are increasingly concerned about the status of their fund transfers, particularly when their transactions encounter issues (i.e., whether their accounts have been credited correctly or if they will receive refunds).
To address these concerns, the Bangko Sentral ng Pilipinas (BSP) issued BSP Circular No. 1195 (Consumer Redress Mechanism Standards for Account-to-Account Electronic Fund Transfers under the National Retail Payment System Framework) on June 1, 2024 (Circular No. 1195). Circular No. 1195 aims to establish an effective consumer redress mechanism specifically for account-to-account electronic fund transfers (EFTs). BSP mandates that all supervised institutions offering EFTs provide timely consumer recourse mechanisms for issues raised by consumers, facilitated through their participation in the Automated Clearing House (ACH).
Circular No. 1195 applies to all Clearing Switch Operators (CSOs) and ACH participants involved in domestic EFTs, including Person-to-Person (P2P), Person-to-Merchant (P2M), and Person-to-Biller (P2B) payments. However, Circular No. 1195 does not cover disputes concerning the delivery of products or services linked to the payment transaction.
ACH is a multilateral agreement among ACH participants governing the clearing and settlement of payment orders for a specific payment stream. On the other hand, CSO refers to the party designated which provides clearing switch services by acting as the operator of a payment system to be used by the ACH participants in accordance with the guidelines and principles set forth in related ACH documents.
The institutions covered by Circular No. 1195 must adhere to the following BSP requirements:
a. Notification on EFTs. The National Retail Payment System (NRPS) framework, encompassing all retail payment-related activities, mechanisms, institutions and users, requires that the beneficiary’s account receive immediate credit within two to three seconds after the receiving financial institution (RFI) receives the clearing advice from the CSO. For batched EFTS the turnaround time for credit shall not exceed two hours or not later than the next settlement cycle for multiple settlement cycles.
The originating financial institution (OFI) should promptly notify the sender about the status of the EFT, while the RFI must inform the beneficiary once the funds have been credited to their account.
The notification should also clearly provide information that allows easy identification of the transaction using language that is easily understandable by consumers.
b. Return of Funds. For instant retail payments, such as those facilitated by InstaPay, refunds must be processed within one hour of receiving the sender’s instruction. This policy applies to transactions that are rejected, returned, and timed out.
Payments processed through batch clearing systems, like PESONet, and electronic payments settlement require refunds to be processed within two hours of receiving the settlement report from the CSO for rejected and returned transactions.
With respect to multiple-debit transactions and unsuccessful transactions due to OFI control lapses, funds debited from the sender’s account will be returned as follows:
1. Within one hour of receiving the sender’s instruction for instant payments; and,
2. Within two hours of receiving the settlement report from the CSO for batch clearing and settlement of payments.
However, it should be noted that the foregoing timeframes do not apply to unauthorized or erroneous transactions.
c. Collection and Return of EFT Fee. The BSP likewise requires that guidelines regarding fund transfer fees be clearly established in the ACH operating guidelines and effectively communicated to consumers.
When an EFT transaction warrants the return of collected fees to the sender, the OFI must adhere to the aforementioned timeframes. Additionally, senders are not responsible for fees related to unsuccessful transactions or EFTs that fail due to disruptions in the operations of either the CSO or ACH participants.
d. Disruption of Services and Operations. Circular No. 1195 requires CSOs and ACH participants to inform consumers about scheduled or unscheduled downtime, detailing the timing, method of notification, subsequent updates, and resolution of the downtime.
The responsibilities outlined in the ACH operating guidelines during disruptions that impact the efficient processing of EFTs are separate and additional to those stated in current BSP regulations governing disruptions in financial services and operations.
Covered institutions that violate the provisions of Circular No. 1195 may be held liable, along with their respective directors, officers, and/or employees, for both monetary and non-monetary sanctions. These sanctions may involve fines, imprisonment, or both, as well as the suspension or revocation of their authority to provide financial services and to settle through the Philippine Payment and Settlements System.
As covered institutions have until Dec. 31, 2024 to prepare the required resources for compliance with Circular No. 1195, its impact on electronic transactions in the Philippines remains to be observed. It is anticipated that Circular No. 1195 will foster trust and confidence in the utilization of digital payments.
The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or legal opinion.
Alexandra Yvonne A. Orias is an associate of the Corporate and Special Projects Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
Ref.: https://accralaw.com/2024/06/21/strengthening-consumer-trust-bsps-new-redress-mechanism-for-electronic-fund-transfers-in-the-philippines/