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SEC sets ceilings on interest rates and other fees charged by lending companies, financing companies, and their online lending platforms

In order to implement Bangko Sentral ng Pilipinas Circular No. 1133, series of 2021, the Securities and Exchange Commission (“SEC”) issued Memorandum Circular No. 3, Series of 2022 (the “M.C.”). The M.C. sets the interest rate ceilings of unsecured, general-purpose loans offered by lending companies (“LCs”), financing companies (“FCs”), and their Online Lending Platforms (“OLPs”): (i) that do not exceed P10,000.00, (ii) with loan tenor of up to four (4) months, and (iii) that are entered into, restructured, or renewed beginning 3 March 2022. 

The rates shall be as follows:

  1. A Nominal Interest Rate ceiling equivalent to 6 percent per month (~0.2 percent per day). 
  2. An EIR ceiling equivalent to 15 percent per month (~0.5 percent per day), which shall include the Nominal Interest Rate along with all other applicable fees and charges but excluding fees and penalties for late payment and non-payment.
  3. A cap on penalties for late payment or non-payment at five percent (5%) per month on outstanding scheduled amount due. 
  4. A total cost cap of one hundred percent (100%) of total amount borrowed (applying to all interest, other fees and charges, and penalties) regardless of time the loan has been outstanding.

MC No. 3 also mandates all FCs and LCs, whether they are offering loans or not, to submit an Impact Evaluation Report on or before 15 January each year beginning 2023. FCs and LCs shall also submit a Business Plan indicating the company’s loan products and services as well as the applicable pricing parameters on or before 05 May 2022. This Business Plan shall supersede the initial Business Plan or Plan of Operation in the Company Information Sheet submitted to the SEC prior to the issuance of the Certificate of Authority (“CA”) of the LC or FC.

Non-compliance with the guidelines provided in MC No. 3 shall warrant the imposition of the following administrative sanctions:

Non-compliance with applicable ceiling/s on interest rates and other fees

FCs

LCs

First Offense

PHP 50,000.00

PHP 25,000.00

Second Offense

PHP 100,000.00

PHP 50,000.00

Third Offense

Subject to the facts, circumstances, and gravity of the offense, the SEC may impose:

1. A Fine of not less than twice the penalty for the second offense but not more than One Million Pesos (PHP1,000,000.00); and/or
2. Suspension of financing and lending activities for a period of sixty (60) days; and/or
3. Revocation of the CA, as appropriate for each circumstance.

Depending on the gravity of the offense, the SEC may also proceed with the suspension or revocation of the company’s primary registration.

Non-compliance with Impact Evaluation Report

FCs

LCs

First Offense

PHP 10,000.00 plus 
PHP 200.00 daily penalty

PHP 10,000.00 plus 
PHP 200.00 daily penalty

Second Offense

Suspension of CA

Third Offense

Revocation of CA

Non-compliance with Other Requirements

FCs

LCs

Late submission of Business Plan

PHP 10,000.00 plus PHP200.00 daily penalty

PHP10,000.00 plus PHP200.00 daily penalty

Non-submission of Business Plan

Suspension or Revocation of CA

Implementing amended Business Plan without prior approval of the SEC

The full text of MC No. 3 may be viewed and accessed here.