SEC moves to lower interest rate caps and tighten enforcement

The Securities and Exchange Commission (SEC) has issued a draft memorandum circular proposing a lower interest rate cap on small, short-term consumer loans. Under the draft, unsecured loans up to ₱20,000 with terms of up to six months may soon be limited to a maximum effective interest rate of 10 percent per month.

This policy comes amid rising concern over borrowers being pulled into cycles of debt, especially through online lending platforms that offer quick access to cash but at steep and often opaque costs.

While these loans may address urgent financial needs, high interest and penalty structures can cause repayments to snowball, pushing borrowers toward repeated renewals and deeper financial strain.

The SEC’s authority to impose an interest rate cap rests firmly on law. Beyond its role as the country’s corporate registrar, the Commission is expressly mandated under the Financial Products and Services Consumer Protection Act to safeguard financial consumers.

The law empowers the SEC to determine the reasonableness of fees and charges, set interest limits, and sanction abusive or deceptive market practices. The proposed cap is therefore not merely a policy preference; it is an exercise of statutory duty.

Many countries with visible micro-lending sectors impose interest rate caps to curb predatory lending, particularly where access to credit depends less on banking history and more on immediate financial need.

These caps do not aim to eliminate short-term lending; rather, they ensure that credit remains accessible without becoming exploitative. Reasonable limits make loan costs more predictable, allowing borrowers to plan repayments without fear of sudden or disproportionate escalation.

But any cap is only as effective as its enforcement, and this is where the SEC is also sharpening its regulatory posture. The Commission is not limiting itself to advisories or reminders. It has revoked the licenses of non-compliant lenders, ordered the shutdown of abusive online lending platforms, and, in coordination with law enforcement, seized digital servers used to run illegal lending schemes.

The SEC is also strengthening coordination with the National Telecommunications Commission and major app marketplaces to ensure that mobile lending applications linked to revoked or unregistered entities are removed and prevented from resurfacing under new or disguised branding.

The Commission is likewise intensifying enforcement against harassment and abusive collection practices, including public shaming and unauthorized access to a borrower’s contact list.

Financial protection is not achieved through a single memorandum or a one-time enforcement sweep. It requires consistency, vigilance, and sustained regulatory presence. The SEC’s latest proposal reflects a clear direction: fairer lending terms backed by strong, decisive, and ongoing enforcement.

The goal is a lending environment where consumers are protected, legitimate businesses compete fairly, and confidence in the financial system is strengthened on a foundation of transparency and trust.