Dangerous move

HIDDEN AGENDA

- MARY ANN LL. REYES

The Securities and Exchange Commission (SEC) recently issued a draft memorandum circular that will limit to no more than 10 percent per month the effective interest rate on unsecured, general-purpose loans offered by financing companies (FC), lending companies (LC) and their online lending platforms (OLP) with amounts not exceeding P20,000 and tenors of not more than six months.

This will apply to loans entered into, restructured or renewed beginning Dec. 1 of this year.

According to the draft circular, the 10 percent effective interest rate ceiling per month includes the nominal interest rate ceiling of six percent per month as well as other applicable fees and charges such as processing fees, service fees, documentary stamp tax, but excludes fees and penalties for late payment and nonpayment for which the SEC plans to impose a separate cap of five percent per month on the outstanding scheduled amount due.

A total cost cap of 100 percent of the total amount borrowed, which will apply to all interest, other fees and charges and penalties, regardless of the time the loan has been outstanding, will also be imposed.

Failure to comply will subject the FC and LC to fines of P50,000 and P25,000 for first offense, respectively, to P100,000 and P50,000 for second offense, and a fine of as much as P1 million and suspension of financing and lending activities as well as suspension or revocation of the company’s primary registration.

The SEC is the government agency that regulates and supervises FCs and LCs.

It cited the Financial Products and Services Consumer Protection Act which gave the SEC the authority to determine the reasonableness of the interest, charges or fees which a financial service provider may demand, collect or receive for any service or product offered to a financial consumer.