The Securities and Exchange Commission (SEC) has issued stricter guidelines on interest rates and fees for financing and lending companies to enhance consumer protection.

Released on 10 December via Memorandum Circular No. 14, Series of 2025, the new policy lowers the cap on the effective interest rate (EIR) to 12% per month, or roughly 0.40% per day.

This represents a decrease from the previous 15% monthly ceiling set by the Monetary Board. The regulator also capped the nominal interest rate at 6% per month.

The recalibrated rates apply specifically to unsecured, general-purpose loans of PHP 10,000 or less, with repayment terms of up to four months.

The new ceilings will cover loans entered into, restructured, or renewed beginning 1 April 2026.

SEC Chairperson Francis Lim stated that the move aims to establish a fair environment for both parties.

“The recalibrated interest rate cap offers a balanced and sustainable framework that considers the interests of both lenders and borrowers, consistent with the Commission’s mandate of promoting consumer protection while also ensuring the viability of legitimate financing and lending companies,” Lim said.

In addition to interest caps, the SEC introduced a total cost cap.

The total amount a borrower pays, including interest, fees, and penalties, cannot exceed 100% of the principal loan amount.

Late payment penalties are now fixed at 5% per month on the outstanding scheduled amount.

The Commission warned that circumvention tactics, such as splitting loan amounts or disguising charges, constitute violations.

Penalties range from PHP 50,000 for a first offence to the revocation of the company’s certificate of authority for a third offence.

Featured image: Edited by Fintech News Philippines based on an image by mrsiraphol via Freepik.