DOF wants to weed out predatory lenders

Filipino borrowers could finally get relief from being buried in debt, with the Department of Finance (DOF) cracking down on predatory lenders by capping interest rates and other fees.

Finance Secretary Ralph Recto ordered the Securities and Exchange Commission (SEC) on Wednesday to impose stricter measures on abusive and exploitative lending practices.

“We need to further strengthen protections for our fellow Filipinos, especially as online lending platforms continue to victimize people through excessively high interest rates, trapping them in debt (translated from Filipino),” Recto said.

Through the SEC, interest rates on unsecured loans of up to P20,000 with terms of six months or less will soon be capped at 6 percent per month, with total fees limited to 10 percent.

Interest rate caps only currently apply to small personal loans of not more than P10,000 and payable up to four months.

A 5-percent ceiling will be applied on top of the outstanding amount of late payment or nonpayment penalties.

The SEC also plans to limit the total charges to the amount borrowed.

Penalties

Firms that violate the rules could face fines of P25,000 to P100,000 for first and second offenses, while repeat or serious violations may result in suspension or revocation of their licenses.

The SEC on Oct. 31 said it would welcome public comments until Nov. 14 on the draft memorandum circular versus predatory lenders.

Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act, gives the SEC the power to “determine the reasonableness of interest charges and fees which financial service providers may demand, collect, or receive for any service or product offered to a financial consumer.”

The local online lending space has been growing annually by 28 percent from 2013 to 2023, with Gen Zs boosting this growth, according to a study by online lending platform Digido.

Digido also reported that mobile lending applications totaled 73.5 million downloads in 2024, a 56.4-percent increase from the previous year.

In turn, the Presidential Anti-Organized Crime Commission reported in July that the majority of the 156,000 complaints recorded by the police per month were from victims who had complained of harassment after using online lending applications.

“Through responsive policies and stronger enforcement actions, the SEC will ensure that lending practices remain fair, transparent, and aligned with consumer protection standards, while promoting the continued viability and competitiveness of legitimate financing and lending companies,” SEC Chair Francis Lim said.