The circular, issued by the Monetary Board in 1982, suspended the country’s usury law under Republic Act 2655.

The Securities and Exchange Commission (SEC) wants to cap the interest rate and other fees lending companies (LC) and financing companies (FC) charge on consumer and payday loans as predatory lending continues to be the subject of complaints they receive.

Section 7 of the Republic Act 9474, or the Lending Company Regulation Act of 2007, allows lending companies to grant loans at reasonable rates as may be agreed upon with borrowers.

The same provision, however, provides that the Monetary Board of the Bangko Sentral ng Pilipinas (BSP), in consultation with the SEC and the industry, may prescribe such interest rate as may be warranted by prevailing economic and social conditions.

Section 5 of Republic Act 8556, or the Financing Company Act of 1998, likewise empowers the Monetary Board, in consultation with FC and the SEC, to prescribe the maximum rate or rates of purchase discounts, lease rentals, fees, service and other charges of FC.

In an 8 October letter to BSP Governor Benjamin Diokno, SEC Chairman Emilio Aquino cited the power of the Monetary Board to prescribe the maximum interest rate, fees and other charges that LC and FC may impose.

At present, a lending or financing company can freely agree with a borrower on the terms and conditions of their loan contract, including the imposable interest rate and other charges such as transaction fees and penalties for late payment, on the basis of Central Bank of the Philippines Circular 902-82.

The circular, issued by the Monetary Board in 1982, suspended the country’s usury law under Republic Act 2655.

Predatory lending has propagated abusive, unethical and unfair means of collecting debts, as borrowers struggle to pay exorbitant charges on loans, according to the SEC.

As part of efforts to protect borrowers, the SEC recently issued Memorandum Circular 18, Series of 2019, setting forth the Prohibition of Unfair Debt Collection Practices of Financing Companies and Lending Companies.

The Commission also issued Memorandum Circular 19, Series of 2019, providing for the Disclosure Requirements on Advertisements of Financing Companies and Lending Companies and Reporting of Online Lending Platforms.

Meanwhile, the SEC revoked the primary registration of 2,081 companies for engaging in lending and financing activities without the necessary certificate of authority (CA) in its ongoing crackdown on illegal lending. It has also revoked the CA of two LC.

The SEC also issued cease and desist orders against 42 online lending applications for operating without incorporating and securing a CA.