SEC caps interest rates on small loans
Local regulators made a significant move to combat predatory lending, imposing a cap of 6 percent per month on the nominal interest rate for loans of up to P10,000.
The Securities and Exchange Commission (SEC) released a new memorandum circular, providing the recalibrated ceilings on interest rates and other fees charged by financing and lending firms.
The commission said this was meant to protect lenders, as well as push the industry to be more competitive.
Aside from imposing a ceiling on the nominal interest rate, the corporate regulator slapped an effective interest rate cap of 12 per month or 0.4 percent per day.
Effective interest rate refers to the total nominal interest paid plus other fees and charges, excluding penalty and late payment fees.
The SEC likewise capped penalties for late or non-payment at 5 percent per month on the outstanding scheduled amount due.
The regulator also imposed a total cost cap on the total amount borrowed—applying to all interest, other fees and charges, as well as penalties—regardless of the time the loan has been outstanding.
These caps will apply to loans that do not exceed P10,000 with a tenor of up to four months contracted, restructured or renewed starting April 1, 2026.
“The recalibrated interest rate cap offers a balanced and sustainable framework that considers the interests of both lenders and borrowers, consistent with the Commission’s mandate of promoting consumer protection while also ensuring the viability of legitimate financing and lending companies,” SEC chair Francis Lim said in a statement on Thursday.
Groups that fail to comply with the new policy will face administrative sanctions or penalties ranging from P50,000 to not more than P1 million.
The SEC warned that it may also suspend the erring company’s operations for 60 days or cancel its permits.
