March 23, 2023

The Securities and Exchange Commission has released the draft memorandum circular that will implement a cap on interest rates and other fees by lending and financing companies, and their online lending platforms (OLPs).
The proposed guidelines, released on Jan. 27 for public comment, will operationalize Bangko Sentral ng Pilipinas (BSP) Circular 1133 s. 2021, which prescribes the maximum interest rates and other fees charged by lending and financing companies and their OLPs.
The BSP fixed the maximum nominal interest rate at six percent per month, or about 0.2 percent per day, and the effective interest rate (EIR) at 15 percent per month, or about 0.5 percent per day for covered loans which are unsecured, general-purpose loans that do not exceed P10,000, and with a loan tenor of up to four months. 
The EIR is expressed as the rate that exactly discounts estimated future cash flows throughout the life of the loan to the net amount of loan proceeds.
It includes the nominal interest rate along with other applicable fees and charges, such as processing fees, service fees, notarial fees, handling fees, and verification fees, among others. The EIR excludes fees and penalties for late payment and non-payment.
Lending and financing companies may also only charge up to five percent per month for late payment on outstanding scheduled amounts due.
A total cost cap of 100 percent of the total amount borrowed, applying to all interest, other fees and charges, and penalties, regardless of time the loan has been outstanding, will likewise be imposed.
Under the draft SEC memorandum circular, the cap on interest rates and other fees will apply to covered loans which lending and financing companies will offer once the proposed rules take effect.
The SEC has 60 business days from Jan. 3, when BSP Circular 1133, s. 2021 took effect, to promulgate the rules and regulations implementing the cap on interest rates and other charges imposed by lending and financing companies, and their OLPs.
Lending companies who fail to comply with the rate limits will be subject to penalties worth P25,000 and P50,000 on first and second offenses, respectively, while financing companies will be penalized P50,000 on first offense and P100,000 on second offense.
The penalty on third offense for lending and financing companies will amount to twice the amount imposed on second offense up to P1 million; suspension of their financing and lending activities for 60 days; or revocation of their certificates of authority to operate as a financing/lending company (CAs).
All lending and financing companies must submit an impact evaluation report on or before Jan. 15 of each year following the imposition of rate caps. 
Noncompliance will entail a penalty of P10,000 plus P200 daily for financing companies and P10,000 plus P100 daily for lending companies. Second and third offenses will lead to the suspension and revocation of their CAs, respectively.
The impact evaluation report will form part of the reports that the SEC shall submit to the BSP within one year from the implementation of the cap on interest rates and other charges imposed by lending and financing companies.
The BSP, in turn, will take into account the commission’s reports in reviewing the policy, which is intended as a time-bound relief measure for the unbanked and underserved segment of the population amid the pandemic.
The Monetary Board, which exercises the powers and functions of the BSP, imposed the maximum interest rate and charges on covered loans offered by lending and financing companies, and their OLPs, upon the initiative of the SEC. – Press release