SEC eyes limits on interest rates, fees by lending firms

The Securities and Exchange Commission (SEC) on Friday announced it is looking into implementing stricter limits on interest rates and other fees imposed by lending and financing companies.

In a statement, the corporate regulator said its proposal forms part of its intensified campaign to protect borrowers from predatory lending while ensuring the viability and competitiveness of legitimate lenders.

The SEC said it issued, on October 30, for public comment the draft memorandum circular on Recalibrated Ceilings on Interest Rates and Other Fees Charged by Financing Companies, Lending Companies, and their Online Lending Platforms.

The commission said, under its proposed rules, the ceiling on interest rates and other fees will apply to unsecured general-purpose loans that do not exceed the amount of P20,000 and whose terms do not exceed six months. 

Moreover, the proposed regulation will cover all such loan contracts entered into, restructured, or renewed beginning December 1, 2025, whether online or through traditional and offline distribution channels.

The SEC said it is seeking to impose the limitation on interest rates and fees under Republic Act (RA) No. 11765, or the Financial Products and Services Consumer Protection Act, which grants the Commission authority to “determine the reasonableness of interest charges and fees which financial service providers may demand, collect, or receive for any service or product offered to a financial consumer.”

The corporate regulator said it earlier imposed an interest rate cap for lending and financing companies in 2022, as fixed by the Bangko Sentral ng Pilipinas pursuant to its authority under RA No. 9474, or the Lending Company Regulation Act of 2007, and RA No. 8556, or the Financing Company Act of 1998. 

The regulation, however, applied only to unsecured general-purpose loans not exceeding P10,000 and payable up to four months, the SEC said.

The commission said its latest proposal aims to better reflect current socioeconomic conditions, striking a balance between consumer protection and the competitiveness of duly licensed lending and financing companies.

“The number of borrowers struggling under excessive interest rates has continued to grow in recent years, as certain entities exploit the accessibility of online lending applications to trap our fellow kababayans in cycles of debt,” said SEC chairperson Francis Lim.

“Through responsive policies and stronger enforcement actions, the SEC will ensure that lending practices remain fair, transparent, and aligned with consumer protection standards, while promoting the continued viability and competitiveness of legitimate financing and lending companies,” added Lim.

Maximum interest rates, other fees

In particular, under its proposed rules, the SEC said it is fixing the maximum nominal interest rate at 6% per month or about 0.2% per day.

Moreover, the effective interest rate will likewise be limited to 10% per month, or about 0.33% per day, which shall include the nominal interest rate and all other applicable fees and charges, such as processing fees, service fees, notarial fees, handling fees, and verification fees, among others, but shall exclude fees and penalties for late and non-payment on outstanding scheduled amounts due.

The SEC added that lending and financing companies may only charge penalties of up to 5% per month for late payment or non-payment on outstanding scheduled amounts due.

It said that a total cost cap of 100% of the total amount borrowed, applying to all interest, other fees and charges, and penalties, regardless of the time the loan has been outstanding, will likewise be imposed.

The SEC said the interest rate ceilings and other fees will be subject to a periodic review to ensure they remain in line with evolving industry needs and regulatory requirements.

Penalties

The corporate regulator said lending companies that fail to comply with the interest rate limits will be fined P25,000 for the first offense and P50,000 for the second offense. 

Financing companies will also be subjected to a fine of P50,000 and P100,000 for the first and second offenses, respectively.

For the third offense, the SEC said it may impose a fine equivalent to at least twice the penalty for the second offense, but not more than P1 million, which may also result in the suspension of the company’s financing and lending activities for a period of 60 days and/or the revocation of its secondary license, as appropriate for each circumstance.

Depending on the gravity of the offense, the SEC said it may likewise suspend or revoke the company’s primary registration.

The SEC said its Financing and Lending Companies Department is accepting comments on its draft proposal until November 14. —VAL, GMA Integrated News