MANILA – The Securities and Exchange Commission (SEC) has released the draft memorandum circular that will implement a cap on interest rates and other fees by lending and financing companies, and their online lending platforms (OLPs).
The proposed guidelines, released on January 27 for public comment, 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 PHP10,000 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. The EIR excludes fees and penalties for late payment and non-payment.
Lending and financing companies may also only charge up to 5 percent per month for 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.
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 who fail to comply with the rate limits will be subject to penalties worth PHP25,000 and PHP50,000 for the first and second offense, respectively, while financing companies will be penalized for PHP50,000 for the first offense and PHP100,000 for the second offense.
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 PHP1 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).
All lending and financing companies must submit an impact evaluation report on or before January 15 of each year following the imposition of rate caps.
Noncompliance will entail a penalty of PHP10,000 plus PHP200 daily for financing companies and PHP10,000 plus PHP100 daily for lending companies. The second and third offense will lead to the suspension and revocation of their CAs, respectively.
The impact evaluation report will form part of the reports that the SEC shall submit to the BSP within one year from the implementation of the cap on interest rates and other charges imposed by lending and financing companies.
The BSP, in turn, will take into account the commission’s reports in reviewing the policy, which is intended as a time-bound relief measure for the unbanked and underserved segment of the population amid the pandemic.
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. (PR)
