The Securities and Exchange Commission (SEC) announced on Thursday that it has issued the draft circular for the implementation of the cap on interest rates and other fees imposed by lending and financing companies, and their online lending platforms ( PLO).
In a statement, the SEC said the proposed guidance, released Jan. 27 for public comment, will operationalize the 2021 Bangko Sentral ng Pilipinas (BSP) Circular Series No. 1133, which prescribes maximum interest rates and other fees. charged by loans and financing. companies and their PLOs.
Previously, the central bank capped the maximum nominal interest rate at 6% per month, or about 0.2% per day, and the effective interest rate (EIR) at 15% per month, or about 0.5% per day for covered unsecured loans. , general purpose loans that do not exceed the amount of P10,000 and with a loan term of up to four months.
The EIR is expressed as the rate that exactly discounts the estimated future cash flows through the term of the loan to the net amount of the loan proceeds.
In addition, the EIR includes the nominal interest rate as well as other applicable fees and charges, such as processing fees, service fees, notary fees, processing fees and verification fees, between others.
It excludes fees and penalties for late payment and non-payment.
Additionally, loan and finance companies can only charge up to 5% per month for late payment on scheduled amounts due.
A total cost cap of 100% of the total amount borrowed, applying to all interest, other fees and charges, and penalties, regardless of the term of the loan, will also be imposed.
According to the SEC’s draft circular, the cap on interest rates and other fees will apply to covered loans that lending and finance companies offer once the proposed rules take effect, the corporate regulator said. .
In addition, the SEC said it has 60 business days from January 3, 2022, the date BSP Circular No. 1133, Series of 2021 became effective, to promulgate rules and regulations implementing the ceiling on interest rates and other charges imposed by loan and finance companies. , and their PLOs.
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 offence, the company regulator said.
The penalty for the third offense for loan and finance companies will be twice the amount imposed for the second offense up to 1 million pesos; suspension of their financing and lending activities for 60 days; or the revocation of their certificates of authorization to operate as a finance/loan (CA) company, he added.
Similarly, the SEC requires all loan and finance companies to submit an impact assessment report by January 15 of each year following the imposition of rate caps.
Failure to comply will result in a penalty of 10,000 pesos plus 200 pesos per day for finance companies and 10,000 pesos plus 100 pesos per day for loan companies, he said.
The second and third offense will result in the suspension and removal of their CAs respectively, he added.
The impact assessment report will be part of the reports that the SEC will submit to the BSP within one year of the implementation of the cap on interest rates and other fees imposed by loan companies and funding.
In turn, PASB will consider the reports of the Commission when reviewing the policy, which is designed as a time-limited relief measure for the unbanked and underserved segment of the population amid the pandemic. .
In October 2019, the SEC said it had formally requested the BSP to consider capping the interest rates and other fees that loan and finance companies can charge on consumer and payday loans, at the amid the proliferation of predatory and abusive lending practices.
According to the SEC, several loan and finance companies have imposed exorbitant interest rates, fees and charges on their unsecured, short-term, low-value and high-cost consumer loans, bringing Filipinos down in the debt trap, according to the corporate regulator.
He added that predatory lending has consequently propagated abusive, unethical and unfair means of collecting debts, with borrowers struggling to pay exorbitant fees on loans.
Current regulations allow loan and finance companies to agree freely with a borrower on the terms and conditions of their loan agreement, including the taxable interest rate and other charges such as transaction fees and penalties for late payment, the SEC said.
As part of efforts to combat predatory and predatory lending, the SEC said it invoked the provisions of Republic Act No. 8556, or the Finance Companies Act of 1998, and Republic Act No. 9474, or the Credit Companies Regulation Act of 2007, which empowers the BSP Monetary Board to prescribe the maximum interest rates that may be charged by finance and loan companies , in consultation with the Commission and the industry, if prevailing economic and social conditions justify it.
Earlier, the SEC issued Circular Memorandum No. 18, Series of 2019, outlining the prohibition of unfair debt collection practices by finance and loan companies. —LBG, GMA News