The Securities and Exchange Commission (SEC) is looking at putting a cap on interest rates and other fees collected by lending and financing companies, and their online lending platforms (OLPs).
The SEC has released the draft guidelines that will operationalize Bangko Sentral ng Pilipinas’ (BSP) Circular No. 1133 Series of 2021, which prescribes the maximum interest rates and other fees charged by lending and financing companies, and their OLPs.
“The BSP fixed the maximum nominal interest rate at 6 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 which are unsecured, general-purpose loans that do not exceed the amount of P10,000 and with a loan tenor of up to four months,” the SEC said.
“The EIR includes the nominal interest rate along with other applicable fees and charges, such as processing fees, service fees, notarial fees, handling fees, and verification fees, among others. It excludes fees and penalties for late payment and non-payment,” it added.
The SEC also noted the BSP circular also caps late payment on outstanding scheduled amounts due.
“A total cost cap of 100 percent of the total amount borrowed, applying to all interest, other fees and charges, and penalties, regardless of time the loan has been outstanding, will likewise be imposed,” it said.
Under the draft SEC memorandum circular, the cap on interest rates and other fees will apply to covered loans which lending and financing companies will offer once the proposed rules take effect.
The SEC has 60 business days from Jan. 3, 2022, when BSP Circular No. 1133, Series of 2021 took effect, to promulgate the rules and regulations implementing the cap on interest rates and other charges imposed by lending and financing companies, and their OLPs.
“Lending companies which 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 for P50,000 for the first offense and P100,000 for the second offense,” the SEC said.
“The penalty for the third offense for both lending and financing companies will amount to twice the amount imposed for the second offense up to P1 million; the suspension of their financing and lending activities for 60 days; or the revocation of their Certificates of Authority to Operate as a Financing/Lending Company (CAs),” it added.
The SEC said that as part of the guidelines, all lending and financing companies must submit an impact evaluation report on or before January 15 of each year following the imposition of the rate caps. “Noncompliance will entail a penalty of P10,000 plus P200 daily for financing companies and P10,000 plus P100 daily for lending companies. The second and third offense will lead to the suspension and revocation of their CAs, respectively,” it said.
“Several lending and financing companies have imposed exorbitant interest rates, fees, and charges on their unsecured, short-term, small-value, and high-cost consumer credit, causing Filipinos to fall into debt traps,” it said.
“Predatory lending has consequently propagated abusive, unethical and unfair means of collecting debts, as borrowers struggled to pay exorbitant charges on loans,” it added.
The SEC said interested parties have until Feb.11, 2022 to comment on the draft guidelines that is now accessible on the SEC website.
