Philippines Department of Finance backs Securities and Exchange Commission proposal to cap small unsecured loan charges at 6% nominal and 10% effective per month

The Philippines Department of Finance announced that the Securities and Exchange Commission (SEC), under its supervision and following instructions from Finance Secretary Ralph G. Recto, is finalising a memorandum circular to tighten regulation of lending and financing companies by setting caps on interest rates and other fees to curb abusive and exploitative practices. The proposed ceilings would apply to unsecured general-purpose loans of up to PHP 20,000 with terms of up to six months. The draft sets a maximum nominal interest rate of 6% per month (about 0.2% per day) and caps the effective interest rate, including all other costs and fees, at 10% per month (around 0.33% per day). Late payment or nonpayment penalties would be limited to 5% per month on the outstanding amount, and the SEC intends to limit total charges to the amount borrowed. Noncompliance could trigger fines ranging from PHP 25,000 to PHP 100,000 for first and second offences, with heavier sanctions including suspension or revocation of permits. The update cites Republic Act No. 11765 as empowering the SEC to determine reasonable interest rates and fees for financial service providers. Public input on the proposed guidelines is open until 14 November 2025 ahead of finalisation of the memorandum circular.