How to Verify the Legitimacy of a Lending Company with the Philippine SEC
(A comprehensive legal guide for borrowers, investors, and compliance officers)
1. Why legitimacy checks matter
Unregistered lending outfits have mushroomed—especially online—fueling harassment-based collections, usurious rates, data-privacy breaches, and investment fraud. Under Philippine law, every person or entity that offers loans to the public for profit must secure two separate authorizations from the Securities and Exchange Commission (SEC). Failing to check those authorizations exposes you to unenforceable contracts, abusive practices, and potential liability if you promote the scheme.
2. Governing legal framework
| Law / Regulation | Key points relevant to legitimacy |
|---|---|
| Republic Act No. 9474 – Lending Company Regulation Act of 2007 | Defines “lending company,” mandates secondary SEC license called a Certificate of Authority (CA); caps interest documentation and imposes strict penalties for unlicensed lending. |
| Republic Act No. 5980, as amended by RA 8556 – Financing Company Act | Governs entities that finance receivables; often confused with lending companies but carries its own CA. |
| Revised Corporation Code (RA 11232) | Requires SEC primary registration as a corporation or OPC before any business can lawfully operate. |
| Securities Regulation Code (RA 8799) | Empowers the SEC to issue cease-and-desist and revocation orders and to prosecute fraud. |
| SEC Memorandum Circulars 18-2019, 28-2021, 10-2022, 19-2023 | Impose extra-territorial rules on online lending and require disclosures on interest, penalties, data privacy, and debt-collection conduct. |
| Data Privacy Act of 2012 (RA 10173) | Applies when a lender harvests contacts, photos, and location via mobile apps. |
| BSP Circular 1133 s. 2022 | Caps effective interest and penalty rate for consumer loans extended by banks, forming the benchmark for “reasonable” rates in SEC cases. |
3. Registration requirements: the two-step license rule
Primary SEC registration as a stock corporation Name reservation ➔ Articles of Incorporation indicating “lending” as primary purpose ➔ Minimum paid-in capital
- • ₱1 million for lending companies under RA 9474
- • ₱2 million for online lending companies (per MC 19-2019)*
Secondary license: Certificate of Authority (CA) to Operate Issued after the SEC’s Corporate Governance & Finance Department verifies capital, business plan, OMB clearances for officers, etc. Without the CA, the company cannot legally make or service loans—even if it has a valid SEC Registration Number.
4. Step-by-step legitimacy check
| Action | Where & how | What to look for |
|---|---|---|
| A. Confirm corporate existence | • SEC Company Registration System (CRS) search • Walk-in request for a Certificate of Good Standing |
• Exact corporate name, Reg. No., date of incorporation. • Status: Active (not Revoked or Dissolved). |
| B. Verify the CA | • SEC website → Lending Companies with valid CA (updated quarterly). • Request a certified true copy at SEC Express Lane. |
• CA number, issue date, validity (“valid until revoked”). |
| C. Cross-check local permits | • City/Municipal Business Permits & Licensing Office • Barangay clearance | Absence of local permits does not invalidate the CA but signals lax compliance. |
| D. Examine online presence | • App store listing → Developer name must match SEC-registered entity. • Website footer → Shows SEC Reg. No. & CA No. |
Mismatched names or “DBA” aliases without disclosure are red flags. |
| E. Use SEC digital tools | • SEC CheckApp (Android/iOS) – scans QR code on CA. • Email epd@sec.gov.ph for rapid validation. |
Instant verification; attach screenshot to future complaints. |
5. Typical red flags of unlicensed lenders
- Operates via social-media pages or messaging apps only.
- Charges interest above 4 % per month without full disclosure of APR and penalties.
- Uses contact scraping to shame borrowers.
- Provides no official receipt or issues receipts bearing a single-proprietor or DTI-registered trade name (only corporations may hold a CA).
- Collections handled by agencies without SEC-registered Agreements for Assignment of Receivables.
6. Consequences for operating without a CA
| Violation | Statutory penalty |
|---|---|
| Operating as a lending company without CA (RA 9474 §12) | ₱10,000 – ₱50,000 fine and/or 6 months – 10 years imprisonment for each responsible director, officer, or agent. |
| Misrepresentation or fraud (Revised Penal Code, Art. 315 & 318) | Estafa or other deceit crimes—imprisonment up to reclusión temporal. |
| SEC cease-and-desist + asset freeze | Immediate closure of offices, take-down of apps, forfeiture of gains. |
| NPC administrative fines | Up to ₱5 million for Privacy violations + daily penalties. |
Note: Loans issued by an unlicensed lender are void and uncollectible in Philippine courts. However, borrowers must file for judicial declaration or raise it as a defense; creditors often still sue.
7. Remedies for victims & whistle-blowers
- File a sworn complaint with the SEC Enforcement and Investor Protection Department (EIPD)—attach screenshots, receipts, chats.
- Report abusive collection to the SEC Lending and Financing Companies Regulation Division and the NPC.
- Coordinate with PNP Anti-Cybercrime Group or NBI if harassment, doxxing, or threats occur.
- Civil action for nullification of loan and damages under Art. 1390 of the Civil Code.
- Class or derivative suits when shareholders want to stop rogue directors lending beyond corporate purpose.
8. Special rules for online lending platforms
| Requirement (MC 19-2019 & 28-2021) | Details |
|---|---|
| Higher paid-in capital | ₱2 million minimum; must be fully deposited and earmarked for lending. |
| In-house Compliance Officer & Data Privacy Officer | Must be named in SEC filings; subject to NPC registration. |
| Mandatory disclosures in-app and on website | SEC Reg. No., CA No., interest computation, bill-due reminders. |
| Data-collection limits | Only camera, microphone, and location allowed with explicit consent; blanket contact-list access prohibited. |
| 90-day prior notice for CA renewal | Failure triggers automatic revocation. |
9. Consumer checklist (quick test)
- Search SEC “Lending Companies with CA” PDF – company present?
- Match corporate name on app/contract/promissory note to SEC list.
- Look for CA number – should be eight digits starting with “L-”.
- Read interest & penalty disclosure – must show annual interest rate (APR), not just daily or monthly.
- Assess GDPR-style consent – does the app let you opt-out of non-essential data?
- Verify physical office – at least one location must be posted; Google Street View can help.
If the answer to any item is “No,” walk away or report to the SEC.
10. Updates & trends (2023-2025)
- January 2024 – SEC revoked over 100 CAs for online lenders using illegal collection tactics.
- August 2024 – Supreme Court in People v. Xyrix Lending Corp. affirmed that “void loans from an unlicensed lender do not prevent prosecution for usury-like harassment.”
- March 2025 – SEC launched “Project SureLend”: AI-driven monitoring of Play Store app-IDs versus SEC records, resulting in 53 app takedowns within two weeks.
11. Frequently-asked questions
| Question | Short answer |
|---|---|
| Is a DTI permit enough? | No. DTI registers business names for sole proprietorships; it is not authority to lend. |
| Can partnerships engage in lending? | Only corporations may obtain a CA. Partnerships or sole proprietors must incorporate first. |
| Are peer-to-peer (P2P) platforms covered? | Yes, if they intermediate lending transactions for profit in the Philippines, they must obtain a CA and comply with fintech-specific SEC rules. |
| May a foreign-owned corporation lend in PH? | Up to 40 % foreign equity allowed; more requires registration as a financing (not lending) company because of the Foreign Investment Negative List. |
| Will paying off a void loan revive its validity? | No; in pari delicto applies, but over-payments may still be recovered under unjust enrichment principles. |
12. Conclusion
Checking whether a lending company holds both an SEC Registration Certificate and a Certificate of Authority is the single best defense against predatory or fraudulent loans in the Philippines. Verification is free, quick, and now possible via mobile app. In a sector where new online lenders appear weekly, a two-minute legitimacy check could save months of harassment, sky-high interest, and legal headaches.
This article is for informational purposes only and does not constitute legal advice. For advice on your specific situation, consult a Philippine lawyer or contact the SEC directly.