SEC caps interest rates, fees of lending firms

The Securities and Exchange Commission (SEC) has issued a memorandum circular that puts a cap on interest rates and other fees imposed by lending and financing companies, and their online lending platforms (OLPs).

SEC Memorandum Circular No. 3, Series of 2022 (SEC MC 3), which will take effect on March 3, provides the guidelines on the Implementation of Bangko Sentral ng Pilipinas Circular No. 1133, Series of 2021 on the Ceiling/s of Interest Rates and Other Fees charged by Lending Companies, Financing Companies, and their Online Lending Platforms.


The BSP circular prescribes the maximum interest rates and other fees charged by lending and financing companies, and their OLPs.

The central bank 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.

This applies to 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 EIR is expressed as the rate that exactly discounts estimated future cash flows throughout the life of the loan to the net amount of loan proceeds.

It 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.

Meanwhile, lending and financing companies may only charge penalties up to 5 percent per month for late payment or non-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.

The cap on interest rates and other fees will apply to covered loans which lending and financing companies will offer once the rules take effect on March 3.

All lending and financing companies must submit an Impact Evaluation Report on or before January 15 of each year starting 2023.

The Commission will also require all lending and financing companies, whether or not offering loans covered by the ceiling, to submit a business plan indicating the company’s loan products and services, as well as applicable pricing parameters, that is compliant with SEC MC 3.

The Monetary Board, which exercises the powers and functions of the BSP, imposed the maximum interest rate and charges on covered loans offered by lending and financing companies, and their OLPs, upon the initiative of the SEC.

In October 2019, the SEC formally requested the BSP to consider capping the interest rates and other fees that lending and financing companies may charge on consumer and payday loans, amid the proliferation of predatory and abusive lending practices.

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.

Predatory lending has consequently propagated abusive, unethical and unfair means of collecting debts, as borrowers struggled to pay exorbitant charges on loans.

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