MANILA, Philippines — The Securities and Exchange Commission (SEC) has issued a memorandum implementing the cap on interest rates and other fees charged by loan and finance companies.
The new rules will come into effect today.
The Bangko Sentral ng Pilipinas has set the maximum nominal interest rate at 6% per month or approximately 0.2% per day, and the effective interest rate (EIR) at 15% per month or approximately 0.5% per day. day for unsecured covered loans, – loans for purposes not exceeding the amount of 10,000 pesos and a loan term 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 finance companies offer once the rules take effect.
Lenders that breach the rate limits will be subject to penalties worth P25,000 and P50,000 for the first and second offense respectively, while finance firms will be penalized P50,000 for the first offense and P100,000 for the second offense, the SEC said.
Third offenders may have their certificates of authorization to operate as a finance/loan (CA) company revoked by the SEC.
The SEC will require all lending and finance companies, whether or not they offer loans covered by the cap, to submit a business plan outlining their lending products and services, as well as applicable pricing parameters. , no later than May 5, 2022.
In October 2019, the SEC asked the BSP to consider capping interest rates and other fees charged by lenders on consumer and payday loans, amid a proliferation of predatory lending practices and abusive.
This followed numerous complaints against several loan and finance companies that charge exorbitant interest rates, fees and charges on their consumer loans.
“Predatory lending has therefore propagated abusive, unethical and unfair means of collecting debts as borrowers struggle to pay exorbitant fees on loans,” the SEC said.