In the Philippines, the relationship between a credit card issuer and a cardholder is governed by the contract (Terms and Conditions) and supervised by the Bangko Sentral ng Pilipinas (BSP). When a cardholder falls into default, banks and third-party collection agencies employ two primary tools: the Phone Call and the Demand Letter.
While both serve to recover unpaid dues, they carry different legal weights and are subject to strict ethical guidelines under BSP Circular No. 454 and the Financial Products and Services Consumer Protection Act (RA 11765).
1. The Phone Call: The Primary Contact
The phone call is usually the first point of contact once a payment is missed. Its primary purpose is "soft collection"—reminding the debtor of the lapse and negotiating a payment arrangement.
- Legal Standing: A phone call is an informal notice. While it signifies the bank's intent to collect, it does not hold the same evidentiary weight as a written document in a court of law.
- Prohibited Practices: Under Philippine law, collectors cannot use threats, profanity, or harassment.
- Timing: Calls must be made between 6:00 AM and 10:00 PM, unless the debtor gives express consent for other times.
- Confidentiality: Collectors cannot inform your employer, neighbors, or friends about your debt (unless they are co-makers).
- Misrepresentation: They cannot claim to be lawyers, police officers, or court officials if they are not.
2. The Demand Letter: The Legal Precursor
A Demand Letter is a formal written notice sent to the debtor requiring payment within a specific period (usually 3 to 10 days). It is often a prerequisite for filing a civil case for Sum of Money.
- The "Final" Demand: To legally put a debtor in "mora" (default), a written demand is generally required. Without a formal demand letter, a debtor can sometimes argue that the obligation is not yet "due and demandable" in a legal sense.
- Contents: A valid demand letter must state the exact amount owed, the deadline for payment, and the specific consequences of failing to pay (e.g., endorsement to legal counsel or filing a civil suit).
- Evidentiary Value: In court, a Demand Letter with proof of receipt (Registry Receipt or received copy) is vital evidence to prove that the creditor exhausted all means to collect before seeking judicial relief.
Key Differences at a Glance
| Feature | Phone Call | Demand Letter |
|---|---|---|
| Nature | Informal/Negotiatory | Formal/Legal |
| Purpose | Immediate follow-up and reminders | Establishing legal default (mora) |
| Evidence | Difficult to prove in court | Strong documentary evidence |
| Harassment Risk | High (due to verbal nature) | Low (documented and traceable) |
| Legal Prerequisite | Not required for lawsuits | Usually required for filing a civil case |
Important Legal Realities in the Philippines
No Imprisonment for Debt
Under Article III, Section 20 of the 1987 Philippine Constitution, "No person shall be imprisoned for debt." You cannot go to jail simply because you cannot pay your credit card balance. However, you can face criminal charges if you used a bouncing check (BP 22) to pay the debt or committed fraud/estafa in the application process.
Small Claims Court
For credit card debts not exceeding PHP 1,000,000.00, banks may file a case in the Small Claims Court. This is an expedited process where lawyers are not allowed, and the goal is a quick resolution or settlement.
Unfair Collection Practices
The BSP provides a mechanism for consumers to report "reproachable" collection tactics. If a collector threatens you with "immediate arrest" via a phone call or sends a demand letter that looks like a fake court subpoena, they are violating BSP Manual of Regulations for Banks (MORB).
Note: If you receive a demand letter, do not ignore it. It is often the last window for a "Debt Restructuring Program" or a "Settlement Agreement" before the bank escalates the matter to a full-blown lawsuit.
Would you like me to draft a sample response letter to a bank requesting a debt restructuring or a payment moratorium?