SEC imposes cap on lending, financing firms’ interest rates

MANILA, Philippines — The Securities and Exchange Commission (SEC) is set to implement the Bangko Sentral ng Pilipinas (BSP) circular, which  imposes a cap on interest rates and other fees charged by financing and lending companies.

In a notice, the SEC gave financing and lending companies 15 days to submit their comments on a draft memorandum circular implementing the BSP’s new regulation, which sets caps on lending rates.

The BSP has set a nominal interest rate ceiling of six percent per month or approximately 0.2 percent per day for covered loans.

It also set the limit on effective interest rate at a maximum of 15 percent per month or approximately 0.5 percent per day.

This includes the nominal interest rate as well as applicable charges such as processing, service, notarial, handling and verification fees, but excludes fees and penalties for late payment or non-payment.

The regulator likewise set a five percent per month ceiling on penalties for late payment or non-payment on the outstanding scheduled amount due, as well as a total cost cap of 100 percent of total amount borrowed.

This applies to all interest, other fees and charges, and penalties, regardless of the time that the loan is outstanding.

The caps apply to unsecured, general-purpose loans offered by lending firms, financing companies and online lending platforms, not exceeding P10,000 and payable within four months.

Non-compliance with the interest rate caps will result in the imposition of a P50,000 fine for financing companies and P25,000 fine for lending companies for the first offense, and double the amount for the second offense.

For the third offense, the SEC may slap a fine of up to P1 million, suspension of financing and lending activities, and revocation of the certificate of authority to operate as a financing and lending company.

The SEC issued the circular because it was aware that several financing and lending companies, especially those that operate online lending platforms, impose exorbitant interest rate, fees and charges on their unsecured, short term, small value, and high cost consumer credit, thereby causing Filipinos, specifically those in the low income bracket, to fall into debt traps.