MANILA, Philippines – The government crackdown on informal or "5-6” lenders is starting to bear fruit as over 200 of them have applied for registration, according to a report of the Securities and Exchange Commission (SEC) to the Department of Finance (DOF).
SEC chairperson Teresita Herbosa made the report to Finance Secretary Carlos Dominguez III, the DOF said in a press statement on Tuesday, February 28.
The report was made 4 months after the SEC began an investigation into "5-6" lenders, following President Rodrigo Duterte’s order to go after “5-6” lenders.
These “5-6” lenders usually draw many borrowers as they extend loans without collateral or any documentary requirements, but charge an exorbitant nominal interest rate of 20% or more over an agreed period.
The SEC started the investigation in October, along with local government units, the Department of Trade and Industry, National Bureau of Investigation and law enforcement agencies.
The SEC investigation involves the possible filing of criminal complaints for violation of RA 9474.
"The SEC is likely to include the charge of violation of the Truth in Lending Act which likewise imposes fine and/or imprisonment. Foreign informal lenders will be referred to the Bureau of Immigration," Herbosa said in her report.
In line with this, the SEC issued two advisories to inform the public about prohibited lending practices under the law and to encourage informal lenders to register with the Commission.
The advisories cited provisions of Republic Act 9474, or the Lending Company Regulation Act, which prohibits a lending company or investor unless registered with the Commission to become a lending company.
“The said law mandates lending companies to organize only as corporations, making it illegal for individuals to engage in the business of lending without being registered as a corporation with the Commission and secure the required Certificate of Authority (CA),” Herbosa said in her report.
The Commission also allowed SEC-registered lending companies without the required CA to apply for this requirement provided that they apply for and secure it on or before April 30, 2017, she added.
To help expose "5-6” lenders, Herbosa said sh. ordered an audit of lending companies in areas where there are perceived informal lenders Pampanga and Laguna were identified as potential hotspots.
“The potential of being able to extract the needed information is high because they are competitors of these legitimate lenders,” Herbosa said in her report to Dominguez.
Herbosa added that the SEC is also planning to conduct information dissemination seminars “with the intention of giving lenders the opportunity to make their businesses legitimate, and the borrowers to be aware of informal lending schemes.”
Dominguez earlier challenged local banks to do their share in boosting the financial literacy of Filipinos and help prevent them from falling prey to loan sharks and investment scammers.
“Our banks have been slow in adapting to the needs of small entrepreneurs, especially those without enough assets to turn in as collateral. The banks need to do some hard thinking about expanding access for small entrepreneurs, most of whom fall victim to loan sharks,” the finance chief said.—Rappler.com