Philippines’ SEC Issues Guidelines to Stamp Out Predatory Lending Practices

Philippines’ SEC Issues Guidelines to Stamp Out Predatory Lending Practices

by November 26, 2021

The Securities and Exchange Commission (SEC) has issued draft guidelines for the registration and operation of online lending platforms (OLPs) to stamp out abusive and predatory practices.

The proposed guidelines will apply to both existing and newly registered financing and lending companies who have yet to own, operate or utilise OLPs.

This also includes fintech companies as well as those who have partnered with fintechs to provide their credit products or related services.

Under the proposed guidelines, no financing or lending company will be allowed to own, operate, or use OLPs or partner with a fintech without registrations and prior approvals by the SEC.

Applicants for an OLP license must also have at least five directors and at least two independent directors, or such number that that will constitute 20% of the members of the board of directors, whichever is higher.

The applicant should submit certain documents to the commission, including a detailed business and operational plan containing the company’s compliance with relevant acts.

The SEC Corporate Governance and Finance Department (CGFD) will then evaluate the documents submitted by the applicant company.

The financing or lending company will need to present its business and operational plan as well as its marketing strategy, target market, interest rates, loan products, and services before a panel of representatives from the SEC.

The financing or lending company will likewise provide a walk-through of the OLP simulating actual user experience, its complaint-handling process, and a discussion on the extent of data to be collected by the OLP and how they will be handled.

The SEC panel will then submit its recommendation to the Commission En Banc, who will have the final word on whether to grant or deny the application.

Rejected financing and lending companies may reapply after one year and should demonstrate that the reason for rejection no longer exists.

Under the draft guidelines, the OLP license shall have an initial validity of one year from the issuance date, subject to periodical examination and renewal by the SEC.

Those with existing OLPs who wish to develop, own, operate or utilise additional OLPs shall apply anew for it.

Financing companies who fail to comply with the conditions of the OLP license will be subject to penalties.

Depending on the gravity of the offense, the SEC may proceed with the suspension or revocation of the company’s authority to operate and primary license.

According to the SEC’s memorandum,

“Companies with existing OLPs must comply with the guidelines within 180 days from the effectivity of the memorandum circular by applying for an OLP license and submitting a complete set of requirements. Those who fail to submit their application form plus the required documents will be barred from operating their OLPs.


Existing financing and lending companies must also amend their Articles of Incorporation in compliance with the circular within the 180-day period. The SEC may, at its discretion, set a limit on the total number of OLPs that may be established.”

The commission said that it shall take into consideration the total number of applications received, OLPs already existing, and its effects on the industry and the general public.