Understanding Paluwagan System
Paluwagan is an informal system of “savings and/or lending” based on the trust of each member of the group, usually among co-workers, friends, and other closely-knit groups.
Legal Perspective on Paluwagan
The Supreme Court has clarified that engaging in paluwagan is not prohibited under the law. It is not considered a form of gambling or lottery, but rather a scheme where members agree to pool their money in a common fund, with each member receiving the total amount collected at specified intervals.
According to the Supreme Court’s ruling in the case of Dinna Castillo v. Zenaida C. Buencillo, engaging in paluwagan does not violate any law as long as it is conducted within the agreed terms and does not involve illegal activities such as wagering or gambling.
Similarly, in the case of Samuel Barangan v. Court of Appeals and Leovino Jose, the Supreme Court emphasized that while paluwagan itself is not illegal, it can become unlawful if it is used as a means to deceive investors by promising unrealistic returns.
Legal Implications
Paluwagan, as a system to save money among trusted individuals, is generally considered legal. However, if it is misused to attract investments with false promises, it can lead to criminal and civil liabilities for the operator.
Conclusion
It is important to understand the legal boundaries of paluwagan and ensure that it is used for its intended purpose of mutual savings and support, rather than as a tool for fraudulent activities.