Eighty-four lending companies were suspended by the Securities and Exchange Commission (SEC) due to their failure to secure a secondary license to operate as lenders.
In a statement on Thursday, the SEC said the companies violated Section 4 of Republic Act No. 9474 or the Lending Company Regulation Act of 2007, which states that “no lending company shall conduct business unless granted an authority to operate by the SEC.”
The secondary license to operate as a lending company is called certificate of authority (CA).
The SEC earlier sent out over 300 show cause letters to registered companies engaged in lending who have not yet secured their CAs to conduct lending activities.
The show cause letters required the companies to explain why their certificates of registration as a corporation should not be suspended in view of their failure to secure CAs.
Out of the 300 or so second show cause letters, 84 were returned to sender.
“In view of their failure to respond to the show cause letters, these 84 companies shall therefore be suspended for 60 days, and if they still do not respond within the suspension period, proceedings for revocation of their certificates of registration shall immediately ensue,” the SEC said.
This is in line with the SEC’s crackdown on informal lenders that pull borrowers further into debt because of their usurious interest rates.
Under RA 9474, lending companies are corporations engaged in granting loans from their own capital funds or from funds sourced from not more than 19 persons.
“It shall not be deemed to include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law. The term shall be synonymous with lending investors,” the law states.