The Securities and Exchange Commission (SEC) is proposing an increase to the minimum capital requirement for lending companies to eliminate fly-by-night operators and address predatory lending practices.
SEC chairman Francisco Ed Lim said the initiative targets small online lenders that utilize low capital bases to charge excessive interest rates.
Lim said the current low threshold allows almost anyone to register and engage in the lending business, leading to a proliferation of unregulated entities.
“My proposal is to raise the capital requirement for lending companies,” Lim said.
The planned increase aims to ensure only bona fide players remain in the market while encouraging industry mergers and consolidations.
Although the Lending Company Regulation Act currently provides for a P10-million minimum paid-up capital, the regulator is reviewing the requirement under the framework of the Financial Consumer Protection Act.
The commission expects to issue draft rules soon and implement the higher threshold within the year. The move follows a broader crackdown on firms involved in unfair debt collection and exorbitant fees. In December, the regulator capped interest rates for lending companies at 12 percent per month.
In a separate move to improve corporate transparency, the regulator issued a comprehensive compliance checklist for one person corporations (OPCs) to assist them with reportorial requirements.
These guidelines consolidate existing rules on bond posting and outline specific fines for violations under the Revised Corporation Code.
“These new guidelines outline the reportorial requirements and penalties imposed on OPCs. By clarifying expectations around their submissions, we are eliminating ambiguity and empowering business owners to operate with the confidence that they are in full compliance with the law,” Lim said.
The checklist is intended to strengthen monitoring powers over the corporate sector.
“This streamlined approach also allows the SEC to strengthen its monitoring powers over corporations, in line with its mandate of promoting transparency and accountability in the corporate sector,” Lim said.
