Interest rates and other fees charged by lending and financing firms should be given restrictions, the Securities and Exchange Commission (SEC) urged the Bangko Sentral ng Pilipinas (BSP).
In a statement on Monday, the regulator said SEC Chairman Emilio Aquino sent a letter to BSP Governor Benjamin Diokno on October 8, asking for the central bank’s cooperation in setting maximum interest rates and other fees.
“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,” the SEC Chairman said in the letter.
“Predatory lending has propagated abusive, unethical and unfair means of collecting debts, as borrowers struggle to pay exorbitant charges on loans,” he added.
Capping interest rates — which is currently practiced in neighboring countries like Japan, Thailand and Myanmar, and the United States — should be applied not only to the financial sector but to consumer and payday loans as well, Aquino said.
Currently, Republic Act 9474 or the “Lending Company Regulation Act of 2007” allows lending firms to charge reasonable interest rates and charges based on agreed amount with borrowers.
The same act also gives the central bank power to prescribe interest rate given the “prevailing economic and social conditions.”
This, in addition to “Financing Company Act of 1998,” which allows the BSP to set maximum rates of purchase discounts, lease rentals, fees, services and other charges.
In a bid to ensure borrower safety, SEC recently issued Memorandum Circular 18 series of 2019 or the Prohibition of Unfair Debt Collection Practices of Financing Companies and Lending Companies.
The regulator has also been intensifying its efforts in halting operations of illegal online lending operators.
Since September, it has issued 48 cease and desist orders against operators found to be running without authorized licenses.