The Department of Finance (DoF) on Tuesday said more than 200 informal lenders have applied for registration with the Securities and Exchange Commission (SEC) after the government initiated a crackdown against loan sharks engaged in “five-six” and other usurious lending practices.
The rush to legitimize lending operations was among the initial results of a tough stance against loan sharks since Malacañang told the SEC to get though on “five-six” lenders.
“Five-six” lenders usually extend loans without collateral or any documentary requirement, but charge their borrowers an exorbitant nominal interest rate of 20 percent or more over an agreed period.
“The SEC has initiated an investigation into the activities of suspected informal lenders for possible filing of criminal complaints,” SEC Chairperson Teresita Herbosa was quoted as saying in her report to Finance Secretary Carlos Dominguez 3rd.
“Apart from charging them with violation of Republic Act 9474 (Lending Company Regulation Act), the SEC is likely to include the charge of violation of the Truth in Lending Act which likewise imposes fine and/or imprisonment. Foreign informal lenders will be referred to the Bureau of Immigration,” the report read.
In her report, Herbosa said the SEC is now checking flyers, online ads and text messaging promos as of the efforts seek out illegal lenders. The commission is also looking into over collection activities in public markets to expose informal lenders and file charges against them.
The SEC-led investigations were started in coordination with local governments, the Department of Trade and Industry, National Bureau of Investigation and law enforcement agencies.
Following President Rodrigo Duterte’s directive, the SEC issued two advisories informing the public about prohibited lending practices and encouraging informal lenders to register with the commission.
Among the features of illegal lending are unreasonable interest rates or fees, harassment tactics in collecting from borrowers, coercing borrowers to buy home appliances and other items on credit, filing criminal complaints against borrowers to circumvent the prohibition on imprisonment for non-payment of debt.
Herbosa said the SEC is also planning to conduct information dissemination seminars “with the intention of giving lenders the opportunity to make their businesses legitimate, and the borrowers to be aware of informal lending schemes.”
She met with Trade Secretary Ramon Lopez and Sen. Alan Peter Cayetano to discuss ways on how the government could help small borrowers such as market vendors access legitimate lenders with the goal of “eventually obliterating five-six lenders.”