SEC to lending firms: Help ease burden of borrowers

The Securities and Exchange Commission (SEC) has asked financing and lending firms to adopt measures, such as lowering their rates and penalties, to help their customers cope with the impact and challenges brought about by the coronavirus disease pandemic.

In its notice, the SEC said it “strongly encourages” the lending and financing firms that it oversees to implement debt-relief measures, which may also include loan-term extension, suspension of collection, payment holiday and debt consolidation.

Financing and lending companies may also develop and implement their own programs or schemes that will provide financial relief to their borrowers, it said.

The SEC said it is communicating directly with financing and lending companies, which have been the subject of numerous complaints from the public, and “urge” them to adopt schemes that will help their borrowers.

“We call on financing and lending companies to adopt all possible measures that will help ease the burden of their borrowers amid this public health emergency, which has disrupted the everyday lives of Filipinos, including their livelihoods,” said SEC Chairman Emilio B. Aquino.

He said a number of financing and lending companies have already adopted debt-relief measures. For one, the Philippine Finance Association has informed the SEC that at least 18 of its members have allowed the extension of payment deadlines, without penalties and fees.

The SEC last year has requested the Bangko Sentral ng Pilipinas (BSP) to consider capping the interest rates and other fees that lending and financing companies charge on consumer and payday loans.

“With LCs/FCs [lending companies/financing companies] 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,” said Aquino in his letter to the BSP.

“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.

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 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.

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 Republic Act 2655.