EXPLAINER: BSP's consumer protection through redress mechanism for online payments

As the use of electronic or digital payments continues to grow amid its increased adoption in the overall payments ecosystem of the country, the Bangko Sentral ng Pilipinas (BSP) has issued standards for consumer redress covering online fund transfers.

In its Circular 1195, series of 2024, issued on June 1 signed by BSP Deputy Governor Mamerto Tangonan, the central bank outlined mechanisms on how consumers can seek recourse on issues arising from the use of digital payments.

The central bank requires all its supervised institutions that offer electronic fund transfers to provide timely consumer recourse mechanisms on issues lodged by consumers, through their participation in the Automated Clearing House (ACH).

ACH refers to a multilateral agreement among its participants governing the clearing and settlement of payment.

The regulation applies to person-to-person, person-to-merchant, and person-to-bill payments.

The rules, however, do not cover dispute resolution on the delivery of products and/or services underlying the payment transaction.

Required notifications

Financial institutions are required to have effective modes of notification ensuring both the sender and receiver of the status of the electronic fund transfer.

The BSP's rules require immediate credit of the fund to the receiver's account within two to three seconds upon receipt of clearing advice.

For unsuccessful, rejected, timed-out, and returned transactions, the central bank mandates that the amount debited from a sender's account shall be immediately returned within one hour.

Meanwhile, for unauthorized or erroneous transactions, financial institutions have the primary responsibility of communication to the sender or account holder the status and updates on investigations and eventual resolution.

Fund transfer fees

On the collection of fund transfer fees, the central bank said its supervised institutions must clearly communicate to their customers its rules in various channels and publicly available materials.

When a collected fund transfer fee must be returned, financial institutions need to return the collected fee in one hour. This shall apply for rejected, returned, or timed-out transactions.

In any case, the sender shall not bear fees for unsuccessful transactions as well as for fund transfers that did not materialize due to disruption of operations of clearing house or operator.

The BSP also mandates its supervised institutions to notify their customers on the scheduled downtime or occurrence of unscheduled downtime or disruption of services/operations. Periodic or subsequent notification is also required to provide updates and information on the status, reasons, expected period, and eventual resolution of the ongoing disruption.

Covered institutions by the BSP are given until Dec. 31, 2024 to develop necessary resources to comply with the provisions of the latest circular. — VDV, GMA Integrated News