The Securities and Exchange Commission (SEC) has unveiled a proposed policy to cap interest rates and related charges on small-scale loans, a move aimed at protecting consumers from predatory lending practices and fostering fair, transparent financing in the country.

In a draft memorandum circular released Thursday, the SEC proposed a 6 percent ceiling on interest for unsecured general-purpose loans up to ₱20,000, with repayment terms of up to six months. The draft measure was issued pursuant to Republic Act No. 11765, or the Financial Products and Services Consumer Protection Act, and is now open for public consultation.

Key Provisions of the Proposed Regulation

Under the proposed guidelines, lending and financing companies may charge a maximum effective interest rate (EIR) of 10 percent per month, inclusive of all applicable charges such as processing, service, handling, notarial, and verification fees. However, this cap excludes penalties for late or missed payments.

The SEC also proposes allowing penalties of up to 5 percent per month for delayed or non-payment of outstanding dues. The new regulation would apply to loan contracts entered into, restructured, or renewed beginning December 1, 2025, covering both online and offline lending channels.

This proposed adjustment updates the 2022 interest rate ceiling, which only applied to loans not exceeding ₱10,000 and payable within four months.

A Balanced Approach to Consumer Protection

The SEC said the measure aims to reflect current socioeconomic realities, ensuring a balance between protecting borrowers and maintaining the competitiveness of licensed lending and financing firms.

“The number of borrowers struggling under excessive interest rates has continued to grow as some entities exploit online lending platforms to trap our kababayans in cycles of debt,” said SEC Chairperson Francis Lim.

He emphasized that the Commission is committed to upholding responsible and transparent lending practices through responsive policymaking and stronger enforcement.

“Through this policy, we aim to ensure that lending remains fair, transparent, and consumer-centered, while supporting the long-term viability of legitimate financing institutions,” Lim added.

Strengthening Fair Finance in the Digital Era

The SEC’s proposal comes amid the rapid expansion of digital and app-based lending platforms, which have made access to credit easier but also exposed many borrowers to hidden fees and usurious rates.

The Commission said it will continue to consult stakeholders to finalize the guidelines and uphold its mandate to protect financial consumers, ensuring that the Philippine lending industry remains ethical, competitive, and sustainable.

NPO News Team | PNA-PR