The Securities and Exchange Commission has recently announced that it is welcoming public comments until November 14 on a draft memorandum circular that seeks to curb ‘predatory’ lending practices that have victimized thousands of Filipinos as it plans to impose limits on interest rates and other fees charged by lending and financing firms.
Those schemes are also the subject of at least three reform bills pending at the House of Representatives.
Under the SEC’s 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 terms of no more than six months. This will be an update to the 2022 policy that only applied to small personal loans not more than P10,000 and payable up to four months.
The proposed lending guidelines would put a maximum nominal interest rate at 6 percent per month, or about 0.2 percent per day. The effective interest rate, including all other costs and fees, would also be limited to 10 percent per month.
For late payments or nonpayment on outstanding scheduled amounts due, lending and financing groups may only enforce fines of up to 5 percent per month.
The SEC will also limit total charges to the amount borrowed.
It said that credit providers that fail to comply with the interest rate caps would face fines ranging from P25,000 to P100,000 for the first and second offenses, respectively. Heavier penalties, including suspension and revocation of permits, may also be slapped on noncompliant companies.
The SEC said the move intends to “reflect current socioeconomic conditions.”
A study by online lending platform Digido released January showed that the local online lending space has been growing annually by 28 percent from 2013 to 2023, with Generation Z boosting the growth.
However, this growth has been accompanied by an increase in online crimes, with the Presidential Anti-Organized Crime Commission reporting in July that majority of the 156,000 complaints per month recorded by the police were from victims who complained of harassment after using online lending applications.
Lawmakers have also sought to investigate or regulate online lending applications amid reports that they have been imposing unfair interest rates and implementing abusive and unfair debt collection practices, among others.
Loan sharks have long been a part of society, and recent advancs in technology, such as the internet and smartphones, have only extended their reach, allowing them to feed of the desperation of people who feel like they have nowhere else to go, most especially in the aftermath of catastrophic natural disasters like typhoon ‘Tino.’
Government efforts to curb predatory lending practices will certainly be appreciated, even if the authorities are still just playing catch up, just to make sure that more Filipinos don’t get buried in unnecessary debt and get left even further behind.*
