SEC lowers interest rate caps for loans up to P10,000

The Securities and Exchange Commission (SEC) has lowered the interest rates and related fees ceiling being charged by financing and lending companies for short-term loans not more than P10,000.

In a statement on Thursday, the SEC said it issued SEC Memorandum Circular No. 14, Series of 2025 on December 10, 2025.

The MC No. 14 provided for the Recalibrated Ceilings on Interest Rates and Other Fees Charged by Financing Companies and Lending Companies.

Under the memorandum circular, the SEC lowered the effective interest rate cap at 12% per month or about 0.40% per day. 

The corporate regulator defined “effective interest rate” as the total “nominal interest” to be paid plus other fees and charges, excluding penalty and late payment fees.

The Monetary Board, in consultation with the SEC, had previously set the ceiling for effective interest rate at 15% per month or about 0.5% per day.

The latest circular also prohibits lending and financing firms to charge a “nominal interest rate”—or the contractual rate as percentage of total borrowed amount—of more than 6% per month or equivalent to 0.20% per day. 

Moreover, the ceiling for penalties for late and non-payment is fixed at 5% per month on the outstanding scheduled amount due, while the total cost cap is set at 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.

The SEC said the recalibrated ceilings shall cover loans offered by financing and lending companies with principal amounts not exceeding P10,000, and payment terms of up to four months. 

The corporate regulator added that the new ceilings shall apply to loans entered into, restructured, or renewed beginning on April 1, 2026.

The SEC said it adopted the policy in accordance with Section 6(a) of Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act (FCPA), which grants the Commission the authority to determine the reasonableness of the interest charges or fees which a financial service provider may demand, collect, or receive for any service or product offered to a financial consumer.

“The recalibrated interest rate cap offers a balanced and sustainable framework that considers the interests of both lenders and borrowers, consistent with the Commission’s mandate of promoting consumer protection while also ensuring the viability of legitimate financing and lending companies,” said SEC chairperson Francis Lim.

The SEC added that “any attempt to circumvent the interest rate cap through restructuring, repackaging, splitting of loan amounts, recharacterization of fees, shifting of loan tenor, simulated collateral, sham guaranty arrangements, imposition of disguised charges, or any analogous scheme, shall constitute a violation of the memorandum circular.”

The agency said it may impose administrative sanctions against financing and lending companies, as well as their responsible officers, under the Financing Company Act of 1998, the Lending Company Regulation Act of 2007, and the FCPA, for circumventing the interest rate cap, “without prejudice to the filing of other criminal, civil, and regulatory actions under existing laws and applicable jurisprudence.”

The SEC said financing and lending companies that fail to comply with the interest rate limits will face an administrative penalty of P50,000 for the first offense. 

For the second offense, the corporate regulator said it may impose a fine equivalent to at least twice the penalty imposed for the first offense, but not more than P1 million, and/or suspend a company’s financing and lending activities for 60 days.

For the third offense, the SEC said it shall revoke the erring company’s certificate of authority and certificate of incorporation.

“The policy on ceilings on interest rates and other fees shall be subject to a periodic review to ensure it remains aligned with changes in law, industry needs, and regulatory requirements,” it said. — BM, GMA Integrated News