SEC to jack up lending firms’ capital requirement
After capping interest rates, the Securities and Exchange Commission (SEC) will step up efforts to weed out predatory lending companies by jacking up the capital requirement by at least 10 times and introducing a collection agent accreditation system.
In a chance interview with the Inquirer, SEC Chair Francis Lim lamented the proliferation of small-scale lending companies that were preying on hapless consumers.
“It’s because capitalization is P1 million only. Then their effective interest rate was 15 percent a month. That’s why they are so aggressive in lending,” Lim said.
“They have little capital and when a borrower defaults, they strike fear in them,” Lim said.
The Lending Company Regulation Act of 2007 prescribes the minimum paid-in capital of any lending company at P1 million. But the same law mandates the SEC to “prescribe a higher minimum capitalization if warranted by circumstances.”
Asked how much the minimum capital requirement should increase to, Lim said, “I think P10 million. Then, per platform, there must be additional.”
At present, the SEC chief noted that a single lending company could create multiple lending platforms. It’s seen as easy as creating a new website or app under just one incorporated entity.
The law defines a lending company as a corporation engaged in granting loans from its own capital funds or from money sourced from not more than 19 persons.
Despite recent efforts to curb interest rates, revoke the license or issue public warning against shady lenders, Lim acknowledged that many unscrupulous small lenders have continued to prey on Filipino consumers.
Policing collectors
He likewise acknowledged the need to keep abusive collectors in check.
“That’s why we will start the accreditation of collection companies,” Lim said.
At present, some lenders outsource collection to agents, many of whom resort to shaming or harassing borrowers who are unable to pay. In some cases, collectors even send pictures of coffin to the borrowers, and threaten them that they know where the family lives.
By regulating these collection agents via accreditation, the SEC hopes to better discipline these customer-facing entities and end abusive practices.
This new set of reforms that the SEC has studied follows the corporate regulator’s order in December to limit interest rates charged by lending companies.
From as high as 15 percent per month prevailing rate, the SEC decided to introduce a maximum interest rate of 6 percent per month or 0.2 percent per day on loans worth P10,000 and less.
The “recalibrated” ceiling on interest rates is “necessary” to “uphold consumer protection while ensuring the continued viability and competitiveness” of legitimate financing and lending companies, the SEC said in a memorandum circular issued on Dec. 10, 2025.
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. It likewise limited penalties for late or nonpayment at 5 percent per month on the outstanding scheduled amount due.
Further, the regulator 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 on loans that do not exceed P10,000 with a tenor of up to four months contracted, restructured or renewed starting April 1 this year.
