By Denise A. Valdez

THE BANGKO SENTRAL ng Pilipinas is considering the imposition of a cap on interest rates and other fees that lending and financing companies charge on consumer and payday loans, in response to a request by the Securities and Exchange Commission (SEC).

In a statement Monday, the country’s corporate regulator said it wrote to BSP Governor Benjamin E. Diokno on Oct. 8, asking for a limit on interest rates, fees and other charges that lending and financing companies impose on borrowers. In that letter, SEC Chairman Emilio B. Aquino cited high interest rates that reach 2.5% per day, on top of other fees and charges, as among complaints that the SEC receives.

“Thus, the Commission respectfully requests the BSP to consider putting a ceiling on the interest rates, charges, and other fees… The proposed ceiling rates shall not apply to the whole financial sector, but solely to consumer loans and payday loans…,” Mr. Aquino was quoted as saying in the letter.

In a mobile phone message, Mr. Diokno said he has “already instructed our senior staff to study the matter.”

Asked when the BSP could give a definite response to the SEC, Mr. Diokno replied: “… [I] think end of November is a reasonable deadline, then I can bring it up with the MB (Monetary Board).”

Section 4 of Republic Act No. 9474, or the Lending Company Regulation Act of 2007, provides, among others, that “no lending company shall conduct business unless granted an authority to operate by the SEC.”

Section 7 of the same law provides that the central bank’s Monetary Board, in consultation with the SEC and the industry, may prescribe interest rates on lending company loans “as may be warranted by prevailing economic and social conditions.”

Section 5 of another law — RA 8556, or the Financing Company Act of 1998 — provides that “the Monetary Board of the Bangko Sentral ng Pilipinas is… empowered to prescribe, in consultation with financing companies and the Securities and Exchange Commission, the maximum rate or rates of purchase discounts, lease rentals, fees, service and other charges of financing companies, and to change, eliminate or grant exemptions from or suspend the effectivity of such rules whenever warranted by prevailing economic and social conditions.”

At present, lending or financing businesses freely agree with borrowers on terms and conditions of their loan contracts, including interest rate and other charges such as transaction fees and penalties for late payment. It will be recalled that Central Bank of the Philippines Circular No. 902-82 in 1982 suspended the country’s usury law under Act No. 2655.

The SEC said other countries regulate interest rates imposed by lending and financing companies, including Japan, Thailand, Myanmar and United States, to protect borrowers from exorbitant charges on loans.

The SEC said in a separate statement on Monday that it issued last week a cease-and-desist order on six more illegal online lenders: Batis Loan, Happy Credit, Easy Cash, Wahana Credit & Loan Corp., Pesomama and Light Kredit, for not being registered as corporations and not having licenses to operate as lenders.

“[T]he abusive collection practices engaged in by unlicensed online lending companies constitute unfair debt collection practices which are expressly prohibited under SEC Memorandum Circular No. 18, Series of 2019 (Prohibition on Unfair Debt Collection Practices of Financing Companies and Lending Companies),” the statement read, quoting the cease and desist order.

This is the fourth cease and desist order the SEC issued against illegal online lending companies. A total of 48 lenders have now been covered by the regulator’s crackdown that started last month.