Bangko Sentral ng Pilipinas (BSP) will work closely with the Securities and Exchange Commission (SEC) to implement the rules for setting ceilings on interest rates, fees and penalties for the companies covered.
The BSP published Circular No. 1133 on “Ceilings on interest rates and other fees charged by loan companies (LC), finance companies (FC) and their online lending platforms (OLP)” which prescribed interest ceilings, rates and other charges for LCs and CFs will come into effect on January 3, 2022.
Based on the circular, the BSP stated that the SEC “as the primary regulator of LCs, CFs and their PLOs, will formulate and promulgate the necessary issuance providing for the rules and regulations implementing the provisions of this circular. within 60 working days from the entry into force of the circular. Dated.”
The SEC, which has jurisdiction over the covered companies, is “responsible for ensuring compliance of LCs, CFs and their PLOs with the provisions of the circular and for imposing appropriate sanctions and / or actions.”
Based on the circular, caps on interest rates and other charges are a time-bound relief measure for the unbanked and underserved segment of the population amid the pandemic.
Limits on interest rates and other fees for covered loans offered by LCs, CFs and their PLOs will be subject to periodic review by the BSP, in consultation with the SEC and industry, according to the circular.
The BSP said that as part of the review, the SEC will submit a report to the BSP on the compliance of the LCs, CFs and their PLOs.
A full impact assessment report on the effectiveness of the caps will also be submitted to the BSP within one year of the effective date of the SEC’s publication of the implementing rules and regulations. and every year thereafter, BSP said.
“The (BSP) is aware of the difficult economic environment caused by the COVID-19 pandemic which has directly and indirectly affected the payment capacity of borrowers in the unbanked and under-secured segment of the population. In this regard, the objective of (BSP) is to protect borrowers against predatory lending, excessive fees and excessive debt while ensuring continued access to credit, ”BSP said in the circular.
BSP Governor Benjamin E. Diokno last week announced ceilings for short-term, general-purpose and unsecured LC and CF loans not exceeding 10,000 pesos to help low-income borrowers .
Diokno said a nominal interest rate cap of six percent per month or about 0.2 percent per day for low-value loans will be implemented for LCs, CFs and PLOs.
The interest rate caps will apply to general purpose unsecured loans that do not exceed 10,000 pesos and are repayable within a period not exceeding four months. These low-value, short-term consumer loans are the ones primarily taken by low-income borrowers, Diokno said.
The BSP also capped the “effective interest rate” at a maximum of 15% per month or around 0.5% per day.
The effective interest rate includes the nominal interest rate as well as applicable fees such as processing, service, notary, processing and audit fees, among others, but excludes fees and penalties for late or late payment. non-payment.
The central bank will also apply a five percent cap on penalties for late payment or non-payment of the expected amount overdue and a total cost cap of 100 percent of the total amount borrowed. This applies to all interest, other fees and charges and penalties, regardless of how long the loan is unpaid.
The imposition of interest rate caps is in accordance with Republic Law (RA) No. 9474 or the Loan Company Regulation Act 2007 and Law No. 8556 or the Loan Company Regulation Act. 1998 finance companies, which authorize the BSP Monetary Board to prescribe maximum interest rates. interest rates that might be charged by LCs, CFs and PLOs in consultation with the SEC.
Borrowing rates for payday and personal loans increased to 60% per annum in 2014 and 2015 and up to 360% from 2016 to 2019. In 2020, the first year of the pandemic, the nominal interest rate the highest was 504% per year. year or 42 percent per month, according to Diokno.
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