THE Securities and Exchange Commission (SEC) has requested the Bangko Sentral ng Pilipinas (BSP) to consider capping the interest rates and other fees that lending and financing companies may charge on consumer and payday loans.
SEC Chairman Emilio B. Aquino, in a letter to BSP Governor Benjamin E. Diokno, cited the power of the Central Bank’s Monetary Board to prescribe the maximum interest rates, fees and other charges that lending companies and financing companies may impose.
“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.
“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 added.
Predatory lending has propagated abusive, unethical and unfair means of collecting debts, as borrowers struggle to pay exorbitant charges on loans, the SEC said.
The Lending Company Regulation Act of 2007 allows lenders to grant loans in amounts and reasonable rates and charges as may be agreed upon with borrowers.
The same provision, however, provides that the 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.
At present, a lending or financing company can freely agree with a borrower on the terms and conditions of their loan contract, including the imposable interest rate and other charges such as transaction fees and penalties for late payment, in view of Central Bank of the Philippines Circular 902-82.
The circular, issued by the Monetary Board in 1982, suspended the country’s usury law under Act 2655.
“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 read.
Aquino noted that other countries in Asia, such as Japan, Thailand and Myanmar enforce interest rate caps on consumer loans.
Aquino also cited the case of the United States, where regulations on interest rates vary across states. For instance, annual interest rates on payday loans are capped at 25 percent in New York, 30 percent in New Jersey and 17 percent in Arkansas. Google Play, meanwhile, blocks mobile lending applications imposing annual percentage rates of 36 percent or higher.