On 30 October, the SEC issued a draft memorandum circular for public comment, which aims to recalibrate the ceilings on loan charges.
The proposed rules are set to apply to unsecured, general-purpose loans. Specifically, they will cover loans of PHP 20,000 or less with a term of six months or less. This represents an expansion of the previous 2022 caps. The 2022 rules only covered loans up to PHP 10,000 with terms of just four months.
The new rules would cover all loan contracts entered into, restructured, or renewed from 1 December 2025.
Francis Lim
“The number of borrowers struggling under excessive interest rates has continued to grow in recent years,” said SEC Chairperson Francis Lim. “[This is] as certain entities exploit the accessibility of online lending applications to trap our fellow kababayans in cycles of debt.
Under the draft, the SEC is fixing the maximum nominal interest rate at 6% per month (0.2% per day).
The effective interest rate (EIR), which includes all other charges like processing and service fees, will also be limited. The SEC will cap this rate at 10% per month (0.33% per day).
Furthermore, the SEC will cap penalties for late payment at 5% per month. The SEC will also impose a total cost cap, limiting all interest, fees, and penalties to 100% of the total amount borrowed.
Failure to comply will result in fines starting at PHP 25,000 for lending companies and PHP 50,000 for financing companies. A third offence could lead to fines of up to PHP 1 million, suspension, or revocation of the company’s licence.
The SEC is accepting public comments on the draft until 14 November.
