'5-6' lenders seek legitimacy of SEC registration – DOF

Following the crackdown on loan sharks in "five-six" lending schemes and other usurious practices, more than 200 informal lenders have applied register with the Securities and Exchange Commission (SEC).

Citing a report by SEC Chairman Teresita Herbosa, the Department of Finance (DOF) noted such development was among the initial results that came about after President Rodrigo Duterte asked for a tough stance against five-six lenders.

Five-six lenders extend loans without collateral or any documentation, but charge borrowers a nominal interest rate of 20 percent or more over an agreed period.
 
“The SEC has initiated investigation into the activities of suspected informal lenders for possible filing of criminal complaints,” Herbosa said in her report to Finance Secretary Carlos Dominguez III.
 
“Apart from charging them with violation of Republic Act 9474 (Lending Company Regulation Act), the SEC is likely to include the charge of violation of the Truth in Lending Act which likewise imposes fine and/or imprisonment. Foreign informal lenders will be referred to the Bureau of Immigration,” according to the DOF, citing the report.
 
Flyers, online ads and text messaging promos are now being monitored by the commission, as well as overt collection activities in public markets to catch informal lenders

SEC-led investigations started in coordination with local government units, the Department of Trade and Industry, National Bureau of Investigation and other law enforcement agencies.
 
The SEC issued two advisories informing the public about prohibited lending and encouraging informal lenders to register.
 
Issued in October last year, the first advisory cited provisions of RA 9474, or the Lending Company Regulation Act, which makes it illegal to act as a lending company or investor unless registered with the SEC as a lending company.
 
Herbosa said the SEC issued another advisory in November last year encouraging five-six” lenders to register.
 
The second advisory warned informal lenders that they will be investigated and prosecuted if found guilty of violating RA 9474 and the Truth in Lending Act.
 
The SEC noted unreasonable interest rates or fees, harassment tactics in collecting payments, coercing borrowers to buy appliances or other items on credit and filing criminal complaints against borrowers to circumvent the prohibition against imprisonment for non-payment of debt and similar other activities are all illegal practices.

To help expose "five-six” lenders, Herbosa said she ordered an audit of lending companies in areas where informal lending is perceived to be happening.
 
“The potential of being able to extract the needed information is high because they are competitors of these legitimate lenders,” she said.
 
The SEC plans to conduct information campaign to give lenders the opportunity to go legitimate, and the borrowers to be aware of informal lending schemes, Herbosa said. — Ted Cordero/VDS, GMA News