NextGen Day

CEBU CITY, Philippines – On Monday, a member of the Cebu Provincial Board (PB) filed proposed legislation to regulate interest rates and fees charged by small-time lending organizations that give loans but end up trapping homeowners and small-scale businesspeople in “debt traps.”

Glenn Anthony Soco, a PB member from Cebu’s 6th district and chair of the committee on commerce, proposed a nominal interest rate ceiling of 6% per month (0.2%) per day, with an effective interest rate of 15% per month (0.5%) per day for late payment and failure to pay.

Apart from the interest cap, Soco believes that a penalty cap of 5% per month on the outstanding scheduled amount due, as well as a total cost cap of 100% of the total amount borrowed, regardless of the length of time the loan has been outstanding, should be implemented.

Soco said the province’s legislative body is aware of lending organizations that use “5-6” schemes, daily interest payments, and the confiscation of automated teller machine (ATM) cards for payroll and even pension cards to give loans with exorbitant interest rates and maturities.

“These acts are not sanctioned by law and are consequently illegal,” Soco wrote in his first-reading proposal on Monday.

Soco stated Cebuanos are now struggling owing to job losses as a result of the coronavirus disease 2019 (Covid-19) epidemic and Typhoon Odette, and that lending firms are taking advantage of the situation.

“Aside from that, inflation and increasing oil costs caused citizens to hold on to offers for instant cash to handle the considerable increase in prices of products and services,” he explained.

The Securities and Exchange Commission (SEC) issued circulars implementing Bangko Sentral ng Pilipinas (BSP) Circular No. 1133, series of 2021, which sets a ceiling on interest rates and other fees charged by lending companies, financing companies, and other online lending platforms, according to Soco.

Under Republic Act No. 8556, or the Financing Company Act of 1998, and Republic Act 9474, or the Lending Company Regulation Act of 2007, the SEC has regulatory and supervisory jurisdiction over financial and lending companies.

However, because the SEC’s authority is limited to duly-registered financial and lending companies as defined by their specific special laws, Soco’s measure authorizes the provincial government to regulate the imposition of interest rates and other fees against unregistered entities or persons extending loans through PB is necessary.

“Unscrupulous transactions and opportunistic individuals preying on desperate and gullible Cebuanos,” Soco said, adding that the people should be safeguarded.

“In order to protect Cebuanos from these illegal, onerous, oppressive, and unscrupulous financial activities designed by exploitative individuals/businesses preying on innocent and desperate citizens, “the practice of these lending facilities/individuals, especially those considered “fly-by-night” must be stopped.”

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