In the same circular, a cap on penalties for late payment or non-payment at five percent per month on the outstanding scheduled amount due was also fixed. Furthermore, it imposed a total cost cap of 100 percent of the total amount borrowed (applying to all interest, other fees, and penalties) regardless of the time the loan has been outstanding. The ceiling rates are subject to a periodic review by BSP, in consultation with the SEC and the industry.
To implement and monitor compliance with BSP Circular 1133, the SEC issued Memorandum Circular 3, Series of 2022, on 1 March 2022. Section 4 thereof requires all financing and lending companies to submit an annual Impact Evaluation Report beginning in 2023 and a business plan indicating the company’s loan products and services, as well as the applicable pricing parameters.
Failure of the financing and lending companies to submit the aforementioned documents shall be subject to monetary penalties. For those financing and lending companies that offer loans covered by the ceiling or circular, failure to submit the aforementioned documents for the second and third time warrants the suspension and revocation of their Certificate of Authority, respectively. All financial and lending companies shall make the foregoing submissions, whether or not they offer the covered loans.
For failure to comply with the ceiling requirement, financing companies shall be subject to P50,000 monetary penalty for the first offense, and a P100,000 penalty for the second offense. Meanwhile, lending companies that failed to comply with the ceiling requirement shall be fined P25,000 for the first offense and P50,000 for the second offense. If the offense is committed for the third time, a fine of not less than twice the penalty for the second offense but not more than P1,000,000 and/or suspension for a period of 60 days and/or revocation of their Certificate of Authority; and/or suspension or revocation of the company’s primary registration may be imposed, depending on the circumstances, facts and gravity of the offense.
While there have been no known and published reports yet on the non-compliance with BSP Circular 1133 and Memorandum Circular 3-2022, the issuance of such circulars by BSP and SEC paves the way to safer and fair dealings between the borrower and the financing or lending companies — by providing protection to borrowers against predatory lending and ensuring their continued access to credit, while still maintaining the viability of the business operations of the financing and lending companies.
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