(Philippine legal context; general information, not legal advice.)

1) The practice and why it raises legal issues

In some lending arrangements—especially in workplace-based or community-based cooperatives—borrowers are asked (or pressured) to surrender their ATM card (often the same card used for payroll, pensions, remittances, or personal deposits) to the cooperative as a form of “security,” so the cooperative can ensure loan repayment. Variations include:

Cooperative physically keeps the borrower’s ATM card until the loan is fully paid.
Cooperative keeps the card and also obtains the PIN (or requires the borrower to write it down).
Borrower is required to “hand over the card every payday” for withdrawal.
Cooperative keeps the card as “collateral,” promising not to use it unless the borrower defaults.

This practice touches multiple legal regimes: contracts and obligations, property and security arrangements, criminal laws on coercion and access devices, data privacy, consumer/financial protection, labor standards (where payroll cards are involved), and cooperative governance.

The key legal questions are:

Is the arrangement valid as a contract or security?
Is the borrower’s consent real, informed, and voluntary—or coerced?
Does holding/using an ATM card (and especially the PIN) expose the cooperative or officers to criminal and civil liability?
Does the practice violate privacy and financial consumer protection standards?
Are there safer, lawful alternatives that accomplish repayment without taking the card?

2) Core legal point: “Holding an ATM card” is not a recognized, clean form of collateral

2.1 ATM cards are not ordinary “collateral”

An ATM card is typically an access tool linked to a deposit account with a bank or e-money issuer. As a practical and legal matter:

The funds in the account belong to the account holder, but access and use are governed by the deposit contract and the issuer’s rules.
The card itself is commonly treated in banking practice as issuer-controlled (often considered the bank’s property or subject to strict terms of use), and the account holder is responsible for safeguarding it and the PIN.

Using “ATM card deposit/possession” as collateral is legally messy because it is often not a perfected security interest in the way the law expects collateral arrangements to be structured.

2.2 Why it matters under Philippine obligations and contracts

Under the Civil Code, parties generally have freedom to contract, but that freedom is limited by law, morals, good customs, public order, and public policy. A cooperative can require lawful security, but a scheme that effectively lets the lender control the borrower’s access to money—especially wages—can be attacked as:

Contrary to public policy (unfair or oppressive),
Defective consent (if obtained through intimidation/pressure), or
An unlawful means of self-help collection.

3) Consent is everything—and consent is often questionable in real-life scenarios

A cooperative may argue: “The member voluntarily gave the card.” That argument is not always a safe shield.

3.1 Valid consent must be free and informed

Consent may be legally defective if obtained through:

Intimidation (threats, job consequences, public shaming),
Undue influence (abuse of authority, especially in workplace coops),
Deceptive practices (“standard requirement” with no explanation of risks), or
Take-it-or-leave-it pressure where the borrower has no real choice.

When consent is defective, the arrangement may be voidable, and it can also strengthen criminal or civil claims if harm results.

3.2 PIN collection is a flashing red light

Even if a borrower hands over the card, requiring the PIN (or recording it) is difficult to justify as “reasonable security.” It can be characterized as enabling unauthorized access, and it is almost always inconsistent with the account holder’s duty to keep credentials confidential.

4) Criminal law exposure: coercion, theft/estafa theories, and “access device” issues

The criminal-law risk increases dramatically when the cooperative (or its officers/employees) uses the card or controls it in a way that deprives the borrower of funds or freedom of action.

4.1 Grave coercion / unjust vexation (conceptually)

If the card is taken or retained through threats or force, or used to compel the borrower to do something against their will, theories under the Revised Penal Code involving coercion can arise. The factual trigger is usually not the mere possession, but the manner of obtaining/retaining the card and the pressure applied.

4.2 Theft/estafa-type risk when withdrawals exceed authority

If cooperative personnel withdraw funds:

beyond what the borrower authorized,
at times not agreed upon, or
in amounts including fees/penalties not validly due,

the facts can support criminal complaints depending on the circumstances (including misappropriation or deceit-based theories). Even if the cooperative says it is “collecting,” unilateral taking from a personal account can be framed as unlawful taking or misappropriation when the authority is unclear, disputed, or abusive.

4.3 Access Devices Regulation Act (RA 8484) angles

RA 8484 covers fraud and misuse involving “access devices” (broadly defined and often treated to include cards/codes used to obtain money or initiate fund transfers). Risk rises if there is:

Unauthorized use of the card or credentials,
Possession with intent to use unlawfully, or
A pattern of withdrawals that look like access device fraud.

Even when a borrower initially “consents,” disputes commonly arise later (e.g., borrower claims coercion or claims they did not authorize specific withdrawals). That dispute can be enough to pull cooperative officers into an investigation.

4.4 Cybercrime (RA 10175) and electronic evidence realities

Where electronic banking channels, passwords, OTPs, PINs, or digital logs are involved, disputes become evidence-heavy. If the cooperative uses electronic systems or credentials in a way that can be framed as unauthorized access, allegations may be paired with cybercrime theories. Even when charges don’t prosper, the process risk and reputational damage can be severe.

5) Data Privacy Act (RA 10173): why “holding the card and PIN” can be a compliance problem

5.1 Personal data, sensitive personal data, and security

ATM-related information (account linkages, card numbers, transaction histories, and especially authentication credentials like PINs) is high-risk information. Under RA 10173, organizations must follow:

Transparency (clear disclosure of what’s collected and why),
Legitimate purpose (purpose must be lawful and not excessive),
Proportionality (collect only what is necessary), and
Security (organizational, physical, technical safeguards).

5.2 Proportionality problem: taking the card/PIN is usually excessive

For loan repayment, safer mechanisms exist (auto-debit with the bank, salary deduction authorizations, payment channels). Because those exist, demanding the card—especially the PIN—can look disproportionate, exposing the cooperative to privacy complaints and enforcement risk, particularly if data is mishandled or a breach occurs.

5.3 Liability if funds are stolen or misused

If the cooperative keeps cards/PINs and any incident occurs (loss, internal misuse, third-party theft), the cooperative may face:

Privacy complaints for inadequate safeguards, and
Civil claims for damages,
Plus potential criminal exposure depending on facts.

6) Financial consumer protection and fairness standards

Even if a cooperative is not a bank, it is engaged in financial service to members. Modern policy trends in the Philippines emphasize fair treatment, transparency, and responsible collection practices. High-pressure or control-based collection (like taking ATM cards) can be viewed as:

Unfair collection practice,
Abusive conduct, or
Unconscionable terms—especially when the borrower’s payroll or subsistence funds are involved.

This becomes more serious when the cooperative’s member-borrower relationship is unequal (e.g., employer-linked cooperative where job security is felt to be at stake).

7) Labor law issues when payroll ATM cards are involved

If the ATM card is the channel for salary payments, the arrangement risks colliding with labor standards and public policy protecting wages. Key points in principle:

Wages are protected; withholding wages or interfering with employees’ wage access can be unlawful.
Deductions from wages generally require clear legal basis or written authorization and must comply with rules on lawful deductions.
An arrangement that effectively forces employees to surrender their wage access tool can be framed as circumvention of wage protections.

This is especially sensitive for workplace-based cooperatives or lending schemes tied to employment.

8) Cooperative governance: why “it’s in our policy” is not enough

Philippine cooperatives are governed by the Philippine Cooperative Code (RA 9520), CDA regulations, and their own articles, bylaws, and policies. Even if internal policy allows holding ATM cards, internal rules cannot override:

criminal laws,
privacy rules,
public policy limitations on contracts, or
member rights.

Cooperative officers also owe duties of prudence and fidelity. A practice that predictably generates disputes, complaints, or member harm can be criticized as mismanagement, and may trigger administrative or civil accountability.

9) When (if ever) could it be “legal”? A realistic risk-based answer

9.1 Mere custody without PIN and without use (still risky)

If a member voluntarily gives the card for safekeeping, the cooperative never asks for the PIN, never uses the card, and the member can demand return anytime—this is closer to a private arrangement. But even here:

It may violate bank/issuer terms.
It creates foreseeable harm (loss, misuse allegations).
It is a poor risk practice for the cooperative.

9.2 Custody + PIN + withdrawals by the cooperative (high risk, often indefensible)

The moment cooperative personnel can withdraw funds using the card/PIN, the cooperative is effectively using self-help collection through the member’s bank account. This tends to be legally fragile because:

Consent is often contested later,
Proportionality and privacy compliance are doubtful,
Criminal allegations become plausible when disputes arise, and
Wage/public policy concerns intensify if payroll funds are involved.

In practice, this is the scenario most likely to produce legal liability.

10) Civil liability: damages, restitution, and contract disputes

Even without criminal charges, a borrower can pursue civil claims if:

the cooperative refused to return the card,
funds were withdrawn without valid authority,
penalties/charges were deducted without basis,
the borrower suffered losses (missed rent, medical expenses, bounced payments), or
reputational harm occurred (e.g., public shaming tied to repayment).

Courts can also scrutinize whether the repayment scheme is unconscionable or contrary to public policy, especially where the cooperative’s leverage is strong.

11) Practical, lawful alternatives (what cooperatives should use instead)

If the goal is repayment reliability, there are far safer mechanisms than card custody:

Auto-debit arrangement (ADA) or authorized debit through the bank/issuer (where available).
Salary deduction with explicit written authorization, structured to comply with wage-protection rules.
Post-dated checks (with care and proper disclosures).
Payment channels: over-the-counter deposits, digital transfers, bills-payment facilities, e-wallet payments.
Co-maker/guarantor, properly documented.
Chattel mortgage/real estate mortgage for larger loans (with formal requirements).
Assignment of deposit or other recognized security arrangements—done formally, transparently, and with legal review.

These tools reduce coercion claims, reduce privacy risk, and avoid the “access device” trap.

12) Best-practice compliance checklist for cooperatives

If a cooperative wants to avoid legal exposure and member harm:

Do not require surrender of ATM cards or PINs as a loan condition.
Implement clear repayment options and written disclosures (interest, penalties, due dates, computation).
Adopt a fair collection code: no intimidation, no public shaming, no employment threats.
Align policies with Data Privacy Act: collect minimal data, secure it, document consent properly, maintain retention limits.
Train staff on handling member data and disputes; create a complaints and dispute-resolution pathway.
Ensure the board approves policies that prioritize member welfare and legal compliance, and document risk assessments.

13) What members/borrowers can do if a cooperative is holding their ATM card

General steps (facts matter, and consult counsel if needed):

Demand return in writing (keep copies).
Change the PIN and/or request card replacement if you suspect compromise.
Document everything: messages, witnesses, dates, amounts, and any threats.
If payroll/wages are involved, consider raising it through HR/DOLE channels where appropriate.
For data misuse or unsafe handling, consider privacy complaint pathways under RA 10173.
For coercion or unauthorized withdrawals, consider police/blotter and legal counsel—and preserve bank transaction records.

14) Bottom line

In the Philippine setting, cooperatives holding members’ ATM cards for loan repayment is legally hazardous. The risk becomes acute when the cooperative:

conditions loan approval on surrender of the card,
obtains or records the PIN,
uses the card to withdraw funds, or
targets payroll accounts and effectively controls access to wages.

Even if framed as “member consent,” the practice is often vulnerable to challenges based on defective consent, public policy, privacy compliance, unfair collection, wage protections, and criminal allegations tied to coercion or access device misuse. Cooperatives that want repayment certainty should shift to bank-sanctioned debit arrangements, properly authorized salary deductions, or conventional security instruments, rather than physical control of an access device.

If you want, paste a sample cooperative loan form or “ATM card undertaking” clause (with names removed), and I’ll rewrite it into a safer, legally cleaner repayment and security section—still within a cooperative-member framework.