SEC wants cap on rates charged by lending firms

The Securities and Exchange Commission (SEC) wants to put a cap on interest rates and other fees being imposed by lending and financing firms on consumer and salary loans.

SEC has asked the Bangko Sentral ng Pilipinas (BSP) to prescribe maximum rates, fees and other charges to avoid predatory lending.

In an Oct. 8 letter to BSP Governor Benjamin Diokno, SEC chairperson Emilio Aquino cited the power of the central bank’s Monetary Board to prescribe maximum interest rates on these entities.

At present, a lending or financing company can freely set the interest rate and other charges on a loan such as transaction fees and penalties for late payment. This is in view of the Central Bank of the Philippines Circular 902-82.

“The rate of interest, including commissions, premiums, fees and other charges, on a loan or forbearance of any money, goods, or credits, regardless of maturity and whether secured or unsecured, that may be charged or collected by any person, whether natural or juridical, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended,” the circular said.

However, Aquino said other countries in Asia such as Japan, Thailand and Myanmar enforce interest rate caps on consumer loans.

He cited the case of the US, where regulations on interest rates vary across states.

Annual interest rates on payday loans are capped at 25 percent in New York, 30 percent in New Jersey and 17 percent in Arkansas.

“With LCs/FCs that charge as much as 2.5 percent interest rate per day on top of other fees and charges, predatory lending continues to be one of the major subjects of complaints that the commission receives from the public,”

Aquino said in his letter.

“Thus, the commission respectfully requests the BSP to consider putting a ceiling on the interest rates, charges, and other fees that may be imposed by LCs and FCs. The proposed ceiling rates shall not apply to the whole financial sector, but solely to consumer loans and payday loans that are offered by the said companies,” he said.

Section 7 of Republic Act 9474 or the Lending Company Regulation Act of 2007 allows LCs to grant loans in amounts and reasonable rates and charges as may be agreed upon with borrowers.

The same provision, however, provides that the central bank’s Monetary Board, in consultation with the SEC and the industry, may prescribe such interest rate as may be warranted by prevailing economic and social conditions.