FINANCE Secretary Ralph G. Recto has ordered the Securities and Exchange Commission (SEC) to tighten its crackdown on predatory loans by imposing interest rates ceiling and stringent measures on lending and financing firms.
A statement issued by the Department of Finance (DOF) quoted Recto as saying the SEC is finalizing a memorandum circular that would set caps on interest rates and other fees imposed by lending and financing companies. The Commission is seeking public input on the proposed guidelines until November 14, 2025.
‘We need to further strengthen protection for our fellow citizens, especially as the number of online lending platforms increases, where people are often victimized by excessively high interest rates and become mired in debt,’ Recto said. ‘The DOF will help the SEC tighten regulation on these.’
Under the proposed rules, the ceiling on interest rates and other fees will apply to unsecured general-purpose loans with a maximum amount of P20,000 and loan terms of up to six months.
The guidelines propose a maximum nominal interest rate of 6 percent per month or about 0.2 percent per day and an effective interest rate, including all other costs and fees, capped at 10 percent per month or around 0.33 percent per day.
The agency noted that late payment or nonpayment penalties would be limited to 5 percent per month on the outstanding amount. The SEC also intends to limit the total charges to the amount borrowed.
Credit providers that fail to comply with the interest rate caps would face a fine ranging from P25,000 to P100,000 for the first and second offenses.
Heavier penalties, including suspension and revocation of permits, might also be slapped on noncompliant companies, the DOF said.
‘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,’ SEC Chairman Francis E. Lim said.
Under Republic Act 11765 (Financial Products and Services Consumer Protection law), the SEC can determine reasonable interest rates and fees that financial service providers may demand, collect, or receive for any service or product offered to consumers.