SEC puts cap on finance company loans and interest rates
MANILA – The Securities and Exchange Commission (SEC) issued the circular memorandum implementing the cap on interest rates and other fees imposed by lending and finance companies, and their online lending platforms (PLOs).
SEC Memorandum Circular No. 3, Series of 2022 (SEC MC 3), which will become effective on March 3, provides guidance on Bangko Sentral ng Pilipinas (BSP) Circular No. 1133, Series of 2021, on cap(s) interest rates and other fees charged by loan companies, finance companies and their online lending platforms.
The BSP Circular prescribes the maximum interest rates and other fees charged by loan and finance companies, and their PLOs.
The central bank has set 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. day for unsecured covered loans, – loans for purposes not exceeding the amount of PHP 10,000 and 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.
It 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, among others. It excludes late and non-payment fees and penalties.
Meanwhile, loan and finance companies can only charge penalties of up to 5% per month for late payment or non-payment of overdue amounts owed.
A total cost cap of 100% of the total amount borrowed, applying to all interest, other fees and charges and penalties, regardless of how long the loan has been outstanding, will also be imposed.
The cap on interest rates and other fees will apply to covered loans that lending and finance companies offer once the rules come into force on March 3.
Lending companies that do not adhere to the rate limits will be subject to penalties worth PHP 25,000 and PHP 50,000 for the first and second violation, respectively; while finance companies will be penalized PHP 50,000 for the first offense and PHP 100,000 for the second offense.
The penalty for the third offense for loan and finance companies will be twice the amount imposed for the second offense up to PHP 1 million; suspension of their financing and lending activities for 60 days; or the revocation of their certificates of authorization to operate as a finance/loan company. (PR)