SEC seeks to curb ‘predatory’ lending costs

MANILA, Philippines — The Securities and Exchange Commission (SEC) moves to end “predatory” lending schemes by capping interest rates and other fees charged by lending and financing firms.

“The number of borrowers struggling under excessive interest rates has continued to grow in recent years, as certain entities exploit the accessibility of online lending applications to trap our fellow kababayans in cycles of debt,”  SEC chair Francis Lim said in a statement on Friday.

READ: SEC sanctions more erring lending firms

Thus the corporate watchdog has sought public comment on the draft memorandum circular that seeks to curb abusive lending practices.

Under the proposed lending guidelines, the nominal interest rate will be capped 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, or about 0.33 percent per day.

Under the 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.

For late payments or non-payment 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.