Sanctions for Unauthorized Fee Collection in Organizations in the Philippines
(Updated as of 27 July 2025)
1 | Why the Issue Matters
In the Philippine legal system, no one—whether State, corporation, cooperative, school, NGO, or homeowners’ association—may demand or receive a fee unless the charge is expressly authorized by the Constitution, a statute, or a validly issued rule or ordinance. Unauthorized exactions offend two core principles:
- Legality of taxation and charges (Art. VI, Sec. 28 [1], 1987 Constitution).
- Public accountability (Art. XI, 1987 Constitution).
Failure to heed these principles triggers criminal, civil, and administrative liability, often simultaneously.
2 | Universal Legal Foundations
| Source | Key Provision | What It Prohibits |
|---|---|---|
| 1987 Constitution | Art. VI Sec. 28 (1) | Levying any tax, duty or fee without a law |
| Revised Penal Code (RPC) | Art. 213 (Illegal Exactions) | Public officer demanding/collecting fees not authorized by law |
| Art. 315/316 (Estafa & Swindling) | Misrepresentation or conversion of fees in private settings | |
| RA 3019 (Anti‑Graft & Corrupt Practices Act) | Sec. 3 (b) & (c) | Demanding or receiving anything of value in connection with official functions |
| RA 11032 (Ease of Doing Business/ARTA) | Secs. 9‑11 | Criminalizes collection of illegal fees by any government office; imposes admin penalties |
| Civil Code | Arts. 19‑22 & 2154‑2155 | Unjust enrichment; obligation to return money paid without valid cause |
| COA Rules | General & Corporate GAAM | Issue of Notice of Disallowance, refund with interest, surcharge against erring officials |
The above “core” provisions apply across all sectors; specialized regimes add further teeth.
3 | Sector‑Specific Sanctions & Regulators
3.1 Government Offices & Government‑Owned or ‑Controlled Corporations (GOCCs)
| Regime | Typical Violations | Sanctions |
|---|---|---|
| RPC Art. 213 | Illegal exaction | Prisión correccional (6 months 1 day – 6 years), temporary special disqualification, fine |
| RA 3019 | Demand/receive pecuniary benefit | 6 yrs 1 day – 15 yrs jail; perpetual disqualification; forfeiture of benefits |
| RA 11032 / Anti‑Red Tape Act | Imposition of unofficial “facilitation” fees | 6 months‑2 yrs jail (first offense); 2‑6 yrs & perpetual disqualification (second) |
| COA Disallowance | Collection of fees without ordinance or law | Refund of amount + interest; possible surcharge & criminal referral |
| Ombudsman/CSC | Administrative offenses (dishonesty, grave misconduct) | Suspension to dismissal; forfeiture; bar from re‑employment |
3.2 Local Government Units
Same criminal statutes apply. Additionally:
- Local Government Code (LGC) 1991 – fees must be created by ordinance after public hearing (Secs. 129‑133, 191, 192).
- DILG‑DOF Joint Memoranda – erring officials face administrative liability; sanggunian members who voted for an ultra‑vires fee may be meted suspension.
3.3 Banks, Lending & Payment Providers
Regulated by Bangko Sentral ng Pilipinas (BSP) under the New Central Bank Act, the Manual of Regulations for Banks (MORB), and RA 11765 (Financial Products & Services Consumer Protection Act, 2022).
- Unauthorised charges → restitution, fines up to ₱ 200,000 per violation or up to 1% of paid‑in capital for systemic violations; suspension of officers; cease‑and‑desist orders (CDO).
- Customer can also sue under RA 7394 (Consumer Act) for double damages.
3.4 Corporations & Non‑Stock NGOs
The Revised Corporation Code of the Philippines (RCC, RA 11232) penalizes directors/trustees/officers who:
- collect membership, assessment or other fees not in the articles, by‑laws, or board‑approved schedule.
- Administrative fine: up to ₱ 1 million per offense (SEC En Banc Rules 2020).
- SEC may suspend/revoke the certificate of incorporation and, upon DOJ referral, prosecute for estafa.
3.5 Cooperatives
Under the Cooperative Code (RA 9520) and CDA Memorandum Circular 2023‑08:
- Unauthorized collection → refund + admin fine ₱ 20 k–₱ 50 k;
- Repetition or grave offense → cancellation of certificate of registration; criminal referral to DOJ.
3.6 Educational Institutions
- Private basic‑ed schools (DepEd Order 19‑B‑2011) and state universities & colleges (SUCs) (RA 10931 Free Higher Education Law) may charge only enumerated fees.
- Violation → DepEd/CHED can: (a) order refund with 6% interest; (b) suspend/revoke permit to operate; (c) recommend criminal prosecution under Art. 315 (estafa).
3.7 Recruitment & Placement Agencies
POEA Rules 2022 and RA 10022 (Migrant Workers Act):
Charging placement fees beyond the POEA schedule or collecting at prohibited stages results in:
- Administrative: cancellation of license; fine up to ₱ 1 million; perpetual disqualification of responsible officers.
- Criminal: imprisonment 6 yrs 1 day – 12 yrs; fine up to ₱ 2 million.
3.8 Homeowners’ Associations (HOAs) & Condominiums
RA 9904 (Magna Carta for Homeowners) & HLURB/DHSUD Rules:
- Assessments not in the approved schedule → cease‑and‑desist, refund with interest, HOA officer disqualification, fines up to ₱ 50 k per count.
4 | Procedural Mechanics
- Complaint/Report — aggrieved party files with the proper regulator or prosecutor.
- Investigation/Audit — e.g., COA fraud audit, SEC enforcement probe, BSP supervisory assessment.
- Show‑Cause/Pre‑Charge — respondent given due‑process notice.
- Adjudication — administrative body issues decision; may include restitution order.
- Criminal Parallel — Ombudsman/DOJ may file information in the Sandiganbayan (public officers) or trial court (private actors).
- Civil Action — victim may sue for refund, damages, attorney’s fees (Art. 2200‑2208 Civil Code).
Important: Administrative, civil, and criminal tracks are independent; exoneration in one does not bar action in another, per Rosales v. Office of the Ombudsman, GR 226343 (2022).
5 | Notable Jurisprudence
| Case | G.R. No. | Ruling |
|---|---|---|
| People v. Dizon | L‑32796 (1974) | Upheld conviction of municipal treasurer for illegal exactions under Art. 213 |
| De Jesus v. COA | 196467 (2011) | COA may disallow collections by LGU absent ordinance; refund enforceable vs. officials |
| Boyle v. Fernandez | 208912 (2015) | HOA officers personally liable for fees collected sans board approval |
| BDO v. BSP‑MB | 232537 (2019) | Supreme Court sustained ₱ 30 M BSP fine for undisclosed service charges |
| Philippine Recruiters Ass’n v. POEA | 110491 (1993) | Confirmed POEA power to suspend/cancel licenses for excessive placement fees |
6 | Defenses & Mitigating Factors
- Good‑faith reliance on an official opinion or ordinance later voided (may mitigate but not erase liability).
- Voluntary refund before complaint is filed can be a circumstance for lower penalty or closure of investigation in some regulators (e.g., SEC Settlement Program 2024).
- Doctrine of operative facts (for fees collected pursuant to a law later declared unconstitutional) can bar refund for past collections that had reasonable reliance.
7 | Compliance Checklist for Organizations
- Legal Basis Inventory – keep an updated matrix showing every fee, its enabling law/ordinance/board resolution, and regulator approval.
- Transparent Disclosure – publish fee tables; include in contracts, receipts, websites.
- Regulatory Filings – obtain prior approval for new tariffs (BSP, SEC, DepEd, POEA, CDA, DHSUD, LGU councils).
- Internal Controls – segregate collection & accounting; require dual signatories.
- Whistle‑blower Hotline – encourage internal reporting; complies with RA 11032 Sec. 9(b).
- Annual Audit & Certification – COA‑style post‑audit even for private entities; rectify findings within 30 days.
- Training – frontline staff should know the schedule of authorized fees; ignorance is not a defense.
8 | Key Takeaways
- Illegality attaches to the act of collecting, not to how the proceeds are used. Even if funds are spent for a public or corporate purpose, the mere absence of legal authority suffices for liability.
- Multiple regimes overlap. A single unauthorized fee can yield refund orders (civil), imprisonment (criminal), fines and license revocation (administrative).
- Leadership accountability is strict. Directors, trustees, or public officials who “knew or should have known” can be penalized—even if someone else actually pocketed the money.
- Victims are entitled to full restitution plus interest and may pursue moral/exemplary damages when bad‑faith or fraud is proven.
9 | Conclusion
In the Philippines, the “power to charge” is as limited as the power to tax—it is purely a creature of law. Organizations that impose unapproved fees court disallowance, heavy fines, jail time, and reputational ruin. The surest safeguard is a culture of legal compliance, transparency, and prompt restitution whenever doubt arises.