Manila: The Securities and Exchange Commission (SEC) is seeking public comment on a proposed policy aimed at capping interest rates and other charges for lending activities to better protect consumers. A draft memorandum circular was issued on Thursday, focusing on setting limits under Republic Act (RA) 11765, also known as the Financial Products and Services Consumer Protection Act, as stated in a press release on Friday.
According to Philippines News Agency, the proposed memorandum suggests a 6 percent cap on unsecured general-purpose loans up to PHP20,000 with terms not exceeding six months. Additionally, an effective interest rate limit of 10 percent per month is being considered, which encompasses the nominal interest rate and other applicable charges like processing fees, service fees, notarial fees, handling fees, and verification fees. However, this excludes fees and penalties for late and non-payment on outstanding scheduled amounts due.
The proposal also permits lending and financing companies to impose penalties of up to 5 percent per month for late payment or non-payment on outstanding scheduled amounts due. This regulation is intended to cover all such loan contracts entered into, restructured, or renewed starting December 1, 2025, whether through online platforms or traditional offline channels.
This initiative follows a previous interest rate cap for lending and financing companies implemented in 2022, which applied to unsecured general-purpose loans not exceeding PHP10,000 and payable within four months. The SEC noted that the latest proposal aims to better reflect current socioeconomic conditions, balancing consumer protection with the competitiveness of licensed lending and financing companies.
SEC Chairperson Francis Lim highlighted the growing number of borrowers struggling with excessive interest rates, as some entities exploit the accessibility of online lending apps to trap citizens in cycles of debt. He emphasized that through responsive policies and stronger enforcement actions, the SEC will ensure lending practices remain fair, transparent, and aligned with consumer protection standards while promoting the continued viability and competitiveness of legitimate financing and lending companies.
