The Securities and Exchange Commission (SEC) has prepared draft policy that would set lower caps on interest rates and other charges for small loans to protect borrowers from excessive rates.
The draft memorandum circular, issued on Thursday, proposes to set limits on interest rates and fees for lending activities under Republic Act (RA) 11765, or as the Financial Products and Services Consumer Protection Act.
The proposal targets unsecured general-purpose loans up to P20,000 with terms of up to six months. The SEC eyes a 6-percent cap on the nominal interest rate for these specific loans.
It also proposed a limit of 10 percent per month on the effective interest rate, which encompasses the nominal interest rate and all applicable charges. These charges include processing fees, service fees, notarial fees, handling fees and verification fees.
Fees and penalties for late or non-payment on outstanding scheduled amounts due would be excluded from the cap.
The new rules would permit lending and financing companies to charge penalties of up to 5 percent per month for late payment or non-payment on outstanding scheduled amounts due.
