SEC to ban ‘5-6’ lending

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The SEC will no longer allow informal lending, known locally as “5-6”, as the unregulated activity has buried a number of people in debt, Commissioner Teresita Herbosa said Thursday.

The regulator has initiated investigations into activities of suspected informal lenders for possible filing of criminal complaints, Herbosa told reporters. This practice violates

Republic Act 9474 or the Lending Company Regulation Act of 2007.

“It is a crackdown on informal lenders. No person or individual or by himself can engage in lending anymore,” Herbosa said.


Offenders will be fined not less than P10,000 and not more than P50,000, she said. They can also be imprisoned for at least six months, but not more than 10 years, as specified in the law, she added.

Since RA 9474 was passed nearly a decade ago, the SEC has pursued those who are engaged in illegal lending business. Initially, the SEC required those companies with the primary purpose of lending to each obtain a certificate of authority, and some 900 had complied, Herbosa said.

Since then, the SEC has issued more cause letters to about 3,000 companies with the warning that their primary registration with the SEC will be revoked if they fail to obtain a CA and may be fined or penalized.

The SEC may also invoke RA 3765 or Truth in Lending Act, she said. Foreign nationals engaged in informal lending may also be referred to the immigration bureau, she added.

“They do no observe Truth in Lending Act. They are people they call 5-6. Many of these informal lenders would resort to borrowers being imprisoned for debt. But you cannot be imprisoned for non payment of debt. That’s why the SEC will now be running after these informal lenders,” Herbosa said.

To date, Herbosa said a total of 3,512 companies that are engaged in lending business have failed to secure a secondary license or CA.

The SEC is working hand-in-hand with local government units and the police to identify and request borrowers to disclose if there are any harassment, as well as the National Bureau of Investigation to do the covert operations, Herbosa said.

Current investigations of the SEC covers leads such as online advertisements of lending, distribution of flyers, text messages, and overt lending and collection activities in public places like markets.

The SEC said it is also studying how to help borrowers who were forced to make the loans appear as if they have purchased an appliance through credit. The commission said these borrowers who are engaged in such activity are charged criminally for estafa by default, which is a circumvention of the prohibition against imprisonment for non-payment of debt.

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