Executive summary

Yes—third-party collection agents may issue a “notice of default” (i.e., a demand letter) if duly authorized by the creditor. In Philippine law, “default” (mora) arises when a due obligation is not performed after a demand—judicial or extrajudicial—unless an exception applies. A collection agent can validly make that extrajudicial demand, but (1) the underlying contract and agency authority control what the agent can declare or do (e.g., accelerate the debt, agree to restructurings), and (2) sector-specific rules (BSP for banks/credit cards, SEC for lending/financing companies, IC for insurers, etc.) and the Data Privacy Act constrain how collection is conducted. An NOD is often a contractual prerequisite before remedies (acceleration, foreclosure) may be exercised; it also interrupts prescription if made in writing.

Below is a complete, practice-oriented guide.

1) Legal foundations of “default” (mora)

Civil Code, Art. 1169 (mora solvendi). A debtor incurs delay when the obligation is due and demandable and the debtor fails to perform after demand by the creditor, unless demand is unnecessary because:
1. the obligation or the law expressly so provides (e.g., “time is of the essence” or automatic default),
2. demand would be useless (e.g., debtor has rendered performance impossible), or
3. in reciprocal obligations, one party is ready and willing while the other is not.
What counts as a “notice of default”? Philippine statutes do not prescribe a specific “NOD” form for ordinary debts. In practice, an extrajudicial demand in writing (often titled “Demand Letter,” “Notice of Default,” “Final Demand,” “Acceleration Notice,” or “Breach Letter”) is enough to place the debtor in delay—triggering default interest, penalties, damages, and, if stipulated, acceleration.
Article 1155 (interruption of prescription). Written extrajudicial demand interrupts prescription of actions; this is one reason creditors (or agents) send NODs in writing.
Electronic demands. Under the Electronic Commerce Act, electronic data messages and documents generally have legal effect; if your contract allows digital notices, email/SMS/app notifications can constitute valid demand.

2) May a third-party collection agent issue the NOD?

a) Agency principles

General rule. The creditor may act personally or through an agent (Civil Code on agency). Issuing a demand/NOD is a routine act of administration that an agent may perform if authorized.
Scope of authority matters.
- Ordinary demand: Usually covered by general collection authority.
- Acceleration, compromise, novation, waiver, release, or accepting dation in payment: These often require special authority (see Civil Code on acts needing special powers, e.g., Art. 1878 for compromise, novation, etc.). An agent cannot unilaterally change terms, waive rights, or bind the creditor to settlements without that express authority.
- Receiving payments: Agents need clear authority to receive and issue official receipts; otherwise, a debtor pays at risk. If the creditor later disputes the agent’s authority to receive, the debtor may be protected only if the creditor’s acts gave apparent authority.

b) Assigned vs. outsourced collection

Assignment of credit. If the creditor assigns the receivable to the collection company, the assignee becomes the new creditor. Under the Civil Code, the assignment is effective against the debtor upon notification; until notified, payment to the original creditor is valid. After notice, the assignee can issue NODs and enforce remedies in its own name.
Outsourced collection (no assignment). The original creditor remains the creditor; the third-party agent acts in the creditor’s name and must identify its principal and show (if asked) its authority.

Practical tip: NODs from agents should name the principal, state that the agent is acting “for and on behalf of” the creditor, and include contact details of both.

3) Contractual overlays: what your loan/credit agreement requires

Notice prerequisites. Many credit, mortgage, telco, and utility contracts require written notice and a cure period (e.g., “15 days after notice”) before acceleration, disconnection, repossession, or foreclosure. An agent may send this notice if the contract allows the creditor’s “authorized representatives/agents” to notify.
Acceleration clauses. To declare the full balance due and demandable, the agent must have express authority to issue an acceleration notice. Otherwise, the creditor should issue it (or ratify the agent’s act).
Where/how to serve. Contracts usually specify the address, email, or portal for notices and when notice is deemed received (e.g., upon delivery, after x days, or on email timestamp). Follow those clauses meticulously.
Event of default menus. Beyond non-payment, EoDs can include insolvency, cross-default, false representations, and covenant breaches; the NOD should cite the specific EoD and attach or reference evidence.

4) Regulatory and consumer-protection constraints on collectors

The regulator depends on the creditor’s sector. The rules vary, but converge on fair collection, no harassment, transparency, data privacy, and accountability.

Bangko Sentral ng Pilipinas (BSP) – banks, credit card issuers, e-money, some fintech:
- Require fair debt collection and proper outsourcing oversight. Banks remain responsible for agents’ conduct. Credit card rules mandate no threats, no misleading representations, calling only at reasonable hours, and proper identification by agents. Written policies, standard scripts, and complaint handling are expected.
Securities and Exchange Commission (SEC) – lending companies and financing companies:
- SEC issuances prohibit unfair collection practices (e.g., threats, profane language, public shaming, contacting people on the debtor’s contact list absent consent/legitimate purpose, false threats of arrest, posting on social media, or disclosing debt to third parties). Violations can lead to fines, suspension, or revocation of license and even criminal referral under other laws.
Insurance Commission (IC) – insurers/HMOs:
- Parallel expectations on fair collection and outsourcing controls.
Department of Trade and Industry (DTI) – consumer transactions:
- Consumer Act provisions on deceptive, unfair, or unconscionable sales/collection acts may apply.
National Privacy Commission (NPC) – Data Privacy Act (RA 10173):
- Creditors sharing personal data with a collection agent must have a lawful basis, data-sharing or outsourcing agreements, and implement security measures. Agents must collect only what is necessary, avoid debt shaming, and respect data subject rights (access, correction, complaint).
- Disclosing or threatening to disclose debt to employers, relatives, or social networks without lawful basis may be a privacy violation and, separately, an unfair collection practice.

Bottom line: Even a valid NOD becomes unlawful if delivered through harassment, deception, unlawful disclosure, or privacy violations.

5) Contents of a robust, enforceable NOD

A well-drafted notice (by creditor or agent) should include:

Heading/Identity. Agent’s full corporate name, address, and statement that it acts for and on behalf of [Creditor]; include the creditor’s business address.
Reference details. Account number, contract/loan number, date of agreement, amount of obligation, and schedule of dues.
Legal basis. Cite contract provisions (events of default, acceleration, penalty, interest rate, notice clause) and Civil Code Art. 1169 for demand.
Specific breach. Facts establishing default (missed payments, dates, amounts).
Cure period. If the contract grants a cure window, specify the exact last day (calendar date).
Amounts due. Principal, interest, penalty/late charges, fees (with computation basis); avoid unconscionable or unagreed charges.
Right to dispute. A channel to contest or validate the debt, request statements, and lodge complaints (with turnaround times).
Payment instructions. Official payees, reference numbers, and safe channels; warn against paying to unauthorized persons.
Consequences. Acceleration, repossession (for chattel mortgage), foreclosure (real estate mortgage), reporting to credit bureaus, legal action—only if lawful and genuinely intended.
Privacy note. Brief statement on data processing, purpose, and contact for privacy concerns.
Signatory. Name and position of the authorized signatory; include proof of authority if requested (e.g., board resolution, secretary’s certificate, special power of attorney/outsourcing authorization).

6) Service and proof of receipt

Modes: Personal delivery with acknowledgment, registered mail with return card, reputable courier, email to the designated address, and in-app notices if contractually allowed.
Deemed receipt: Follow contractual deeming rules (e.g., 5 business days after mailing, or upon email timestamp).
Evidence file: Keep copies of notices, waybills, registry receipts, return cards, email logs, call recordings (lawfully obtained), and screenshots—critical in litigation.

7) Legal effects of a valid NOD

Constitutes delay (mora): Enables default interest, penalties, and damages per contract and law.
Triggers acceleration: If stipulated and properly invoked by an authorized person.
Starts/remedies clocks: Enables filing of collection suits, replevin (for chattel), or foreclosure steps (see below).
Interrupts prescription: Written demand breaks the running of the limitations period.
Pre-condition for regulatory actions: Some regulators expect evidence of fair notice before reporting to credit bureaus or exercising severe remedies.

8) Special contexts

a) Real estate mortgage / extrajudicial foreclosure (Act No. 3135)

The statute focuses on notice of sale by the sheriff and publication/posting requirements. A pre-foreclosure NOD is typically contractual (e.g., grace/cure periods) and best practice; send it via the modes stipulated and allow the cure period to lapse before requesting foreclosure.

b) Chattel mortgage / repossession

For vehicles/appliances, contracts commonly require demand and cure before repossession. Repossession must be peaceful; unlawful means risk civil/criminal liability and regulatory sanctions.

c) Credit cards

Expect strict rules on calling hours, harassment, identity disclosure, and documentation. Many issuers require the agent to read a disclosure and to offer repayment options rather than threaten suit.

d) Assignments and securitizations

If the receivable is sold, notify the debtor of the new creditor and where to pay. Absent notice, payment to the old creditor can discharge the debtor.

9) Common pitfalls (and how to avoid them)

Agent overreach. An agent declares acceleration or agrees to a settlement without special authority → remedy: annex a SPA/board resolution or let the creditor sign the acceleration/settlement.
Unfair tactics. Threats of arrest, public shaming, contacting co-workers/relatives → can trigger regulatory cases and privacy complaints.
Wrong addressee. Sending to outdated addresses when the contract names the updated email/portal → notice may be ineffective.
Junk fees. Adding unagreed “collection fees” or excessive penalties → risk of being struck down as unconscionable.
Ambiguity. Vague amounts or cure deadlines → courts construe ambiguities against the drafter.

10) Debtor rights and responses

Validate the debt. Ask for statements, the contract, and the agent’s proof of authority.
Dispute errors. Write a timely dispute; keep proof of sending.
Privacy complaints. Report debt shaming or unlawful disclosures to the NPC, and unfair practices to the SEC/BSP/DTI, as applicable.
Negotiate. Restructuring/settlement should be in writing, signed by someone with clear authority; keep receipts.
Legal counsel. Seek advice before signing waivers or surrendering collateral.

11) Templates and checklists

A. One-page NOD checklist (for creditors/agents)

Identity & authority of sender (acting for and on behalf of ___)
Contract identifiers (account/loan no., date)
Specific breach and due amounts (with computation basis)
Clear cure period with calendar deadline
Contract/EoD clauses cited; Art. 1169 reference
Consequences post-cure (acceleration/foreclosure/legal action)
Payment channels and official payee
Dispute & complaint channels (incl. regulator info)
Privacy notice and data-subject rights
Proper service + proof kept

B. Sample “acting for and on behalf of” line

“We, ABC Collections, Inc., acting for and on behalf of XYZ Bank, pursuant to Board Resolution No. ___ and Outsourcing Authorization dated ___, hereby serve this Notice of Default under your Credit Card Agreement dated ___.”

12) Quick answers to frequent questions

Can a collection agent validly place me in default? Yes, if authorized by the creditor to make extrajudicial demands. That demand constitutes the notice needed under Art. 1169.
Can an agent accelerate my loan? Only if the agent has special, express authority to do so under the contract/agency documents. Otherwise, the creditor should issue (or ratify) acceleration.
Is a phone call enough? It can be a valid demand, but use written/electronic notices to avoid disputes and to interrupt prescription.
Does a notice have to say “Notice of Default”? No. Substance over title—any clear demand citing the breach and amount due can place the debtor in delay.
What if the debt was sold to the agent? Then the agent is now the assignee-creditor. After notice of assignment, it may issue NODs and collect in its own name.

13) Practical takeaways

Authority drives validity. An NOD from a collection agent is valid demand if the agent is duly authorized; special acts (acceleration, compromise) need special authority.
Follow the contract. Observe notice methods and cure periods exactly.
Be fair and lawful. Collection is heavily policed: no harassment, no deception, no unlawful disclosure.
Paper the file. Preserve proof of service and computation; it wins cases.
Privacy is non-negotiable. Share and process data lawfully and minimally, with safeguards.

This article offers general information on Philippine law and practice and is not a substitute for tailored legal advice. For high-stakes matters (e.g., acceleration, foreclosure, repossession), consult counsel and align with the correct regulator’s latest circulars and your contract’s precise notice clause.