SEC caps interest rates imposed by lending firms

MANILA, Philippines — The Securities and Exchange Commission (SEC) has  issued a memorandum circular implementing the cap on interest rates and other fees imposed by lending and financing companies.

The new rules will  take effect today.

The Bangko Sentral ng Pilipinas fixed the maximum nominal interest rate at six percent per month or about 0.2 percent per day, and the effective interest rate (EIR) at 15 percent per month or about 0.5 percent per day for covered loans that are unsecured, general-purpose loans that do not exceed the amount of P10,000 and with a loan tenor of up to four months.

According to the SEC, the cap on interest rates and other fees will apply to covered loans that lending and financing companies will offer once the rules take effect.

Lending companies that fail to comply with the rate limits will be subject to penalties worth P25,000 and P50,000 for the first and second offense, respectively, while financing companies will be penalized with P50,000 for the first offense and P100,000 for the second offense, the SEC said.

Third time offenders may see their certificates of authority to operate as a financing/lending company (CAs) revoked by the SEC.

The SEC will require all lending and financing companies, whether or not offering loans covered by the ceiling, to submit a business plan indicating their  loan products and services, as well as applicable pricing parameters, on or before May 5, 2022.

In October 2019, the SEC requested the BSP to consider capping the interest rates and other fees charged by lending companies may charge on consumer and payday loans, amid the proliferation of predatory and abusive lending practices.

This was on the back of numerous complaints against several lending and financing companies that impose exorbitant interest rates, fees, and charges on their consumer loans.

“Predatory lending has consequently propagated abusive, unethical, and unfair means of collecting debts as borrowers struggled to pay exorbitant charges on loans,” the SEC said.