SEC wants to cede lending app oversight to BSP

MANILA, Philippines — The Securities and Exchange Commission (SEC) wants to hand oversight of financing and lending firms to the Bangko Sentral ng Pilipinas (BSP), a shift that could bring tighter supervision to a fast-growing––and sometimes volatile––corner of consumer finance.

For its part, the BSP said it is open to the proposal and has floated the possibility of joint regulation of the industry as a potential middle ground.

At a symposium hosted by the Consumer Lending Association of the Philippines on Tuesday, SEC Commissioner Rogelio Quevedo said he has submitted a position paper to Congress seeking to “entirely” transfer oversight of financing and lending firms to the central bank.

Under current law—specifically the Lending Company Regulation Act of 2007 and the Financing Company Act of 1998—the SEC serves as the primary regulator of these companies.

READ: SEC, gov’t agencies boost crackdown on abusive lending practices

“That is now pending at the committee [level] in Congress,” Quevedo said, adding that supervising such entities has become a “one big headache” for the SEC.

Open to the proposal

In an interview with reporters, BSP General Counsel Roberto Figueroa said the central bank is open to the proposal, adding that the transfer of oversight can either be done via legislation of administrative circulars. He added that discussions between the two regulators are already under way.

“It is not like they (SEC) will just totally leave these entities to us. It’s really more like joint regulation where the SEC agrees to defer to BSP since we have the expertise, the resources to regulate them,” Figueroa said. “What we don’t have, as I said, are just the specific rules on how we’re going to discharge this additional function.”

While online lending apps have expanded credit access for millions of Filipinos, they have also drawn scrutiny for exorbitant interest rates and aggressive debt collection tactics that often involve harassment and the public shaming of borrowers.

Interest rate cap

To fight abuses in the industry, the SEC has issued an order capping at 6 percent per month or 0.2 percent day the nominal interest rate that financing and lending companies can charge on loans worth P10,000 and below.

The corporate regulator also wants to lift a moratorium on new industry players imposed in 2021, alongside tighter capital requirements.

READ: SEC readies rules that lift moratorium on online lending platforms

Under the proposal, regulated firms would face higher minimum paid-up capital depending on how many online lending platforms they operate, after the SEC flagged the current P1 million threshold as too low to prevent undercapitalized lenders from acting aggressively.

READ: SEC pushes overhaul of online lending rules

Quevedo said the SEC is targeting to release the approved memorandum circular lifting the ban on new lending firms “before the second semester of this year.” INQ