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Data disclosed in loan transactions subject to new privacy protections

THE National Privacy Commission (NPC) said it has added new privacy rules governing data disclosed during the loan application process.

In a statement on Wednesday, the NPC said Circular No. 2022-02, issued on Dec. 1, amends Circular No. 2020-01 issued in September 2020. The two circulars prescribe guidelines on the processing of personal data shared by clients in loan applications, loan releases, and loan collection, including character references and the identity of guarantors.

Privacy Commissioner John Henry D. Naga said that the amended circular seeks to address data privacy concerns following a surge in online lending.

“NPC Circular No. 2022–02 provides amendments that will serve as an added protection to both borrowers and lending companies. The NPC aims for smooth transactions between the two parties, where borrowers are afforded their data privacy rights and lending companies are given the opportunity to ethically conduct their business and establish trust among their customers,” Mr. Naga said.  

The amended circular requires a lender, financing company, and other persons acting as such to provide notice before obtaining consent to process the data gathered in the lending process.

The just-in-time notice informs data subjects on how a specific piece of information they are asked to provide will be processed.

“When providing details of processing to data subjects, the lending company, financing company, or other persons acting as such must consider the accessibility of the information and convenience of the borrowers,” the NPC said.

The amended circular also provides that a lending firm, financing firm, or other related persons are prohibited from conducting unnecessary processing involving sensitive and personal information.  

The NPC said that the amended circular allows the processing of a borrower’s contact information in order to verify the person’s identity and to check the truthfulness of the information provided.

“However, the processing must not be unbridled or unconstrained, excessive, and disproportional to its purpose. This includes processing that leads to harassment; processing for collection of debt outside of the guarantors provided by the borrower; and processing that results in unfair collection practices,” the NPC said. 

The amended circular also protects the data privacy rights of the borrower’s character reference and guarantor.

“For those who were chosen as character references, Section 4(C) of the amended Circular provides that a lending company, financing company, or other persons acting as such shall adequately inform the concerned individuals that they were chosen as character reference of the loan applicant and how their contact details were obtained,” the NPC said.

“They must also provide the character reference with the option of having their personal data removed as a character reference,” it added. — Revin Mikhael D. Ochave