In the Philippines, the rise of digital financial services has made credit more accessible, but it has also opened the door for predatory lenders and "fly-by-night" operations. Under Philippine law, specifically the Lending Company Regulation Act of 2007 (Republic Act No. 9474) and the Financing Company Act of 1998 (Republic Act No. 8556), no person or entity shall engage in the business of lending or financing without valid registration and authorization from the Securities and Exchange Commission (SEC).
For your protection, here is a comprehensive guide on how to verify the legitimacy of a lending company.
1. Verification of the Certificate of Incorporation (CN)
Every legitimate corporation in the Philippines must first be registered with the SEC. This provides the entity with a Certificate of Incorporation, which grants it a "Juridical Personality."
However, being a registered corporation is not enough to legally lend money. A company can be a legitimate corporation for "retail" or "consultancy" but still be an illegal lender if it lacks specific secondary licenses.
2. The Certificate of Authority (CA) to Operate
This is the most critical document. Under Section 4 of R.A. 9474, no lending company shall conduct business unless it has obtained a Certificate of Authority (CA) to operate as a lending company from the SEC.
- Lending Companies: Regulated by R.A. 9474.
- Financing Companies: Regulated by R.A. 8556 (these usually involve more complex transactions like factoring or leasing).
Legal Tip: A legitimate lender must be able to provide you with their CA Number. If they can only show a General Information Sheet (GIS) or a Mayor's Permit, they are not authorized to engage in the business of lending.
3. Steps to Verify via the SEC Website
The SEC maintains updated lists of authorized entities to prevent the public from falling victim to illegal Online Lending Platforms (OLPs).
- Visit the SEC Official Website: Go to sec.gov.ph.
- Navigate to Public Information: Look for the "Lending & Financing Companies" section.
- Check the Lists: The SEC regularly publishes:
- List of Registered Lending Companies
- List of Registered Financing Companies
- List of SEC-Registered Online Lending Platforms (OLPs)
- Confirm the App Name: If you are using a mobile app, ensure the App Name is specifically listed under the "Corporate Name" of the registered lender. Many illegal apps use names that sound similar to registered companies.
4. Compliance with the Truth in Lending Act (R.A. 3765)
A "legit" lender must comply with transparency requirements. Under the Truth in Lending Act, lenders are legally required to furnish you with a Disclosure Statement before the consummation of the loan transaction. This statement must clearly show:
- The cash price or amount to be loaned.
- Down payments or credits (if any).
- All fees, service charges, and penalties.
- The total finance charge (expressed as an annual percentage rate).
Failure to provide a clear, written Disclosure Statement is a red flag and a violation of BSP and SEC regulations.
5. Evaluating Fair Debt Collection Practices
The SEC issued Memorandum Circular No. 18 (Series of 2019) to curb abusive collection practices. A lending company is likely illegitimate or operating illegally if they engage in:
- Accessing your phone's contact list without consent.
- "Debt shaming" (contacting people on your contact list or posting on social media).
- Using threats, profanity, or insults.
- Misrepresenting themselves as lawyers or court officials.
Summary Checklist for Borrowers
| Feature | Legitimate Lender | Illegal/Unregistered Lender |
|---|---|---|
| SEC Registration | Has a Certificate of Incorporation. | May have none, or uses a fake one. |
| Secondary License | Has a Certificate of Authority (CA). | Has no CA to operate as a lender. |
| Transparency | Provides a formal Disclosure Statement. | Hides fees until the loan is disbursed. |
| Physical Office | Has a verifiable principal office address. | Operates only through apps or chat. |
| Collection | Follows SEC MC No. 18 guidelines. | Uses harassment and "contact-tracing." |
Legal Recourse
If you discover a lender is not registered or is violating the terms of its registration, you may file a formal complaint with the SEC Enforcement and Investor Protection Department (EIPD). You can also report harassment to the National Privacy Commission (NPC) if your personal data was misused.