Public Service Announcement: Protect Your 13th Month Pay and Salaries from Devastating “Deposit Set-Off” Bank Deductions
By The Philippines Magazine International
As the holiday season approaches, a growing banking practice known as Deposit Set-Off—a term with just three words but potentially devastating consequences—is putting Filipino families at serious financial risk. Recent changes in banking policies have weakened consumer protections, allowing banks and financial institutions to seize funds directly from checking, savings, and debit accounts without prior notice to pay off outstanding debts, including unsecured debts such as credit card bills. This practice, previously criticized by former President Duterte, has resurfaced, threatening to wipe out entire account balances, particularly during the holiday season when many rely on their 13th-month pay and bonuses to make ends meet.
What is Deposit Set-Off?
In simple terms, Deposit Set-Off allows banks to deduct funds from a debtor’s bank account to settle unpaid obligations. Under this practice, if an account holder has a credit card debt or loan in arrears, the bank can exercise its right to access and withdraw funds from any account within its institution, often without notifying the customer. While this may sound like a responsible method for banks to recover losses, for Filipino families, it means that a missed credit card payment could lead to their entire account balance—salaries, bonuses, and 13th-month pay—being swept away.
The Erosion of Consumer Protections
During the height of the COVID-19 pandemic, measures were implemented to protect consumers’ access to critical funds, with Deposit Set-Off practices curtailed to shield people from unexpected financial strain. However, with these protections now removed, banks have resumed this policy with full force, impacting even families who were never informed or aware of their vulnerability. This shift comes just as economic pressures, inflation, and increased living costs are making it harder for households to stay afloat.
From The Author To Our Philippines Financial Institutions:
Look, we get it—everyone’s gotta get paid. But when y’all use Deposit Set-Off to reach straight into people’s accounts, taking their whole check or their 13th-month pay without warning? That’s doing way more harm than good. Families count on these funds to keep a roof over their heads and food on the table, especially around the holidays. When banks pull stunts like this, it doesn’t just hurt folks’ pockets; it shatters trust.
Here’s why this practice is bad for business in the long haul:
- It Breaks Trust Big-Time: When folks find their accounts empty, they feel blindsided and betrayed. Nobody wants to keep banking with an institution they can’t trust to protect their money—especially not when times get tough.
- It Damages Your Reputation: Stories spread fast these days. When word gets out that banks are leaving families with nothing, it fuels public outrage. People remember the brands that put them last, and it’s hard to shake that bad rep once it’s out there.
- It Drives Customers Away: People will jump ship to banks that don’t put their families at risk of going broke overnight. In the end, a policy that doesn’t respect customers’ basic needs is one that’ll push business away.
We’re calling on you to rethink this approach. You have the power to build something stronger, more trusted, and truly good for families and communities in the long run.
How Deposit Set-Off Devastates Filipino Families
The holiday season, a time meant for family, celebration, and financial relief, has now become a period of anxiety for many. Filipino families count on the 13th-month pay to settle debts, purchase necessities, and celebrate modestly. Deposit Set-Off, however, disrupts this safety net, often without notice. Consider these scenarios:
- Case Study 1: A single mother receives her long-awaited 13th-month bonus and salary, only to discover it has been entirely deducted to cover a minor overdue balance on her credit card. Without her salary, she struggles to pay rent and provide for her children.
- Case Study 2: An OFW returning for the holidays is devastated to find that her savings account has been wiped clean by her bank due to an outstanding auto loan installment. With no funds, she faces an unexpected financial crisis while back home.
Why is This Happening?
Deposit Set-Off is part of a wider banking trend to recoup unpaid debts in light of rising delinquency rates and financial strain. While debt repayment is necessary, this aggressive approach is particularly harmful when it leaves customers without enough money for essentials. In many cases, these practices overlook the customer’s ability to afford basic living expenses, potentially leading to homelessness or severe financial distress.
Former Protections: What Changed?
In the past, policies were more protective of individuals’ wages and essential funds, with stricter limitations on Deposit Set-Off. Former President Duterte’s administration placed considerable emphasis on shielding consumers from these practices, especially during the COVID-19 pandemic. However, as these protections were eased, banks regained authority to dip into customer accounts at will, and the ability to enact Deposit Set-Off has returned, leaving Filipinos vulnerable to sudden deductions that they are often powerless to contest.
What Can You Do to Protect Your Funds?
Although Deposit Set-Off poses a serious risk, there are steps you can take to help protect your income and savings:
- Ask About Your Bank’s Deposit Set-Off Policies: Request clear information from your bank about their policies on Deposit Set-Off. Many banks disclose these practices in their terms and conditions, so it’s essential to be aware of your bank’s stance.
- Use Multiple Accounts or a Separate Bank: Consider receiving your 13th-month pay, salary, or other critical income in an account separate from your primary bank if you have debt with them. This can help reduce the risk of sudden withdrawals from your main accounts.
- Contact Your Bank for Repayment Options: If you are struggling to keep up with loan or credit card payments, speak with your bank about a structured payment plan. Proactive communication may prevent surprise deductions through Deposit Set-Off.
- Educate Yourself on Your Rights: Be aware of your rights as a consumer under the Consumer Act of the Philippines. If you feel your rights have been infringed upon, seek advice from financial advisors or legal professionals who can guide you on potential courses of action.
- Advocate for Consumer Protection: Deposit Set-Off is a severe practice that can have far-reaching consequences for families. Support efforts that advocate for greater consumer protections and consider contacting local representatives to express your concern over this practice.
Calling for Legislative Action to Protect Filipino Families
The revival of Deposit Set-Off as a common practice highlights the urgent need for stronger consumer protections. By allowing banks to sweep accounts without considering the customer’s basic needs, families are left vulnerable to losing their financial safety net, particularly during crucial times like the holiday season. As Filipinos, it’s critical to push for regulations that limit banks’ ability to drain essential funds. Even a modest restriction requiring a minimum balance to be left untouched would go a long way in providing stability for families across the country.
A Season of Caution
This holiday season, safeguard your funds and be proactive in understanding how Deposit Set-Off might affect your accounts. By staying informed and vigilant, you can help protect your hard-earned money and prevent sudden losses. Let’s work together to urge policy change that prioritizes Filipino families’ welfare, ensuring that no one spends the holidays in financial devastation due to this unregulated banking practice.
