SEC wants interest rate cap for payday loans
MANILA, Philippines – The Securities and Exchange Commission (SEC) wants to cap interests and other fees on consumer and payday loans to combat predatory lending.
In a statement on Monday, October 28, the SEC asked the Bangko Sentral ng Pilipinas (BSP) to set a maximum interest rate amid complaints on companies charging 2.5% per day on top of other fees.
The SEC said the high interest rates companies impose on unsecured loans is among the frequent complaints that the agency gets.
"Section 7 of Republic Act No. 9474, or the Lending Company Regulation Act, allows [lending companies] to grant loans in amounts and reasonable rates and charges as may be agreed upon with borrowers," the SEC said.
The BSP Monetary Board is the sole body that can prescribe maximum interest rates.
Section 5 of Republic Act No. 8556, or the Financing Company Act, also empowers the Monetary Board to prescribe the maximum rate or rates of purchase discounts, lease rentals, fees, service, and other charges of financing companies.
At present, a lending or financing company can freely agree with a borrower on the terms and conditions of their loan contract, including the interest rate and other charges, such as transaction fees and penalties for late payment.
SEC Chairman Emilio Aquino presented cases in the United States, where regulations on interest rates vary across states. For instance, annual interest rates on payday loans are capped at 25% in New York, 30% in New Jersey, and 17% in Arkansas.
Google Play, meanwhile, blocks mobile lending applications imposing annual percentage rates of 36% or higher.
Aquino also noted that other countries in Asia – such as Japan, Thailand, and Myanmar – enforce interest rate caps on consumer loans.
"With [companies] that charge as much as 2.5% 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," Aquino said.
The SEC recently cracked down on lenders, revoking the primary registrations of 2,081 companies for engaging in lending and financing activities without the necessary certificate of authority. – Rappler.com