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The Securities and Exchange Commission (SEC) wants Bangko Sentral to also put a cap on consumer and payday loan charges offered by loan and finance companies.
This after the Commission praised the central bank’s move to put a maximum annual interest rate cap of 24 percent on all credit card transactions effective November 3, 2020.
The new policy also states that interest rates or finance charges on a cardholder’s credit card outstanding balance must not exceed 2 percent per month.
“Limiting credit card charges is a timely and much-needed measure to promote responsible lending and ease the financial burden on consumers and micro, small, and medium-sized businesses amid the COVID-19 pandemic,” said SEC Chairman Emilio B. Aquino.
He added that, “We are hopeful that the Monetary Board will also soon consider the Commission’s proposal for similar limits on interest rates, fees and other charges imposed by credit and finance companies on consumer and payday loans. , as part of our efforts to end predatory lending and other abusive practices. ”
In October 2019, the SEC asked the Monetary Board, through BSP Governor Benjamin E. Diokno, to consider prescribing a cap on interest rates, fees, and other charges that lending and finance companies may impose.
Since then, the Commission has worked closely with the central bank to push for interest rate caps for lending and financing companies, providing the necessary data and studies in this regard.
Section 7 of the Republic Law No. 9474, or the Credit Companies Regulation Law of 2007, allows loan companies to grant loans in amounts and reasonable rates and charges that are agreed with the borrowers.
However, the same provision authorizes the Monetary Board, in consultation with the SEC and the industry, to prescribe the interest rates that may justify the prevailing economic and social conditions.
Article 5 of the Republic Law No. 8556, or the Financing Companies Law of 1998, also empowers the Monetary Board, in consultation with the financial companies and the SEC, to prescribe the maximum rate or rates of discounts on purchases, leases, rates, services and other charges from financial companies.
Currently, credit and finance companies can freely agree with borrowers the terms and conditions of their loan agreement, including the taxable interest rate and other charges such as transaction fees and late payment penalties, in accordance with the Central Bank of three decades ago. Philippine Circular No. 905-82 that suspended the Usury Law. High interest rates and penalties have been the subject of most of the complaints filed against finance and credit companies.
In this regard, the SEC has invoked the authority of the Monetary Board to regulate the interest rates imposed on consumer loans and payday loans offered by finance and credit companies.
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