How to Verify a Finance Company’s SEC Registration and Lending License in the Philippines

Introduction

In the Philippines, the financial sector is heavily regulated to protect consumers from fraudulent schemes, predatory lending practices, and unlicensed operations. Finance companies, particularly those engaged in lending activities, must comply with registration and licensing requirements primarily overseen by the Securities and Exchange Commission (SEC). Verifying a finance company's SEC registration and lending license is a critical step for individuals, businesses, or investors to ensure legitimacy, mitigate risks, and avoid falling victim to scams such as illegal lending or pyramid schemes.

This article provides a comprehensive guide on the verification process within the Philippine legal context. It draws from key laws including the Corporation Code of the Philippines (Batas Pambansa Blg. 68), the Securities Regulation Code (Republic Act No. 8799), the Lending Company Regulation Act of 2007 (Republic Act No. 9474), and relevant SEC issuances. Note that while this covers general procedures, laws and processes may evolve, so consulting a legal professional or the SEC directly is advisable for case-specific advice.

Legal Framework Governing Finance Companies in the Philippines

SEC Registration

All corporations and partnerships in the Philippines, including finance companies, must register with the SEC to legally operate. The SEC is the primary government agency responsible for registering, regulating, and supervising corporations under the Revised Corporation Code of the Philippines (Republic Act No. 11232, which amended the old Corporation Code). Registration grants the entity legal personality, allowing it to enter contracts, sue or be sued, and conduct business.

For finance companies specifically:

They are typically registered as corporations under the category of "financing companies" or "lending companies."
Under the Financing Company Act (Republic Act No. 5980, as amended), financing companies that extend credit for purchases of goods or services must secure SEC approval.
Failure to register renders the entity illegal, and operations may be subject to penalties, including fines, dissolution, or criminal charges.

Lending License

Not all registered finance companies are authorized to engage in lending. A separate lending license, formally known as a Certificate of Authority (CA) to Operate as a Lending Company, is required under Republic Act No. 9474. This law regulates lending companies to prevent usurious interest rates, unfair collection practices, and unauthorized operations.

Key provisions:

Lending companies must have a minimum paid-up capital (e.g., PHP 1 million for those operating in Metro Manila, as per SEC guidelines).
They must comply with disclosure requirements, such as transparent loan terms, interest rates capped under the Usury Law (as amended by Presidential Decree No. 116), and anti-money laundering rules under Republic Act No. 9160.
The SEC monitors compliance through annual reports, audits, and inspections.
Other regulators may overlap: For example, banks and quasi-banks fall under the Bangko Sentral ng Pilipinas (BSP), while pawnshops and money service businesses have separate BSP licenses. However, pure lending companies (non-banks) are under SEC jurisdiction.

Violations can lead to revocation of the CA, administrative fines up to PHP 100,000 per violation, or criminal penalties including imprisonment.

Steps to Verify SEC Registration

Verifying SEC registration ensures the company exists legally and is in good standing. The process is straightforward and can be done online or in person.

Step 1: Gather Basic Information

Obtain the company's full name, principal office address, and any known SEC company registration number (CRN) or corporate registration details.
If available, note the date of incorporation or any amendments to articles of incorporation.

Step 2: Access SEC Online Resources

Visit the official SEC website (www.sec.gov.ph).
Use the "SEC Express" or "Company Registration Search" feature, which allows free public searches.
Input the company name or CRN. The search will reveal:
- Registration status (active, suspended, revoked, or dissolved).
- Date of incorporation.
- Authorized capital stock and paid-up capital.
- Directors, officers, and stockholders.
- Latest General Information Sheet (GIS) and Financial Statements (FS), which must be submitted annually.

Step 3: Request Certified Copies (If Needed)

For deeper verification, request certified true copies of documents via SEC's online portal or at SEC offices (main office in Mandaluyong City or satellite offices nationwide).
Fees apply (e.g., PHP 100–500 per document).
Check for any annotations, such as pending cases or compliance issues.

Step 4: Cross-Check with Other Databases

While not mandatory, verify against the Philippine Business Registry (PBR) or Department of Trade and Industry (DTI) for sole proprietorships (though finance companies are rarely sole props due to capital requirements).
Ensure the company has a valid Mayor's Permit or Business Permit from the local government unit (LGU) where it operates.

If the company is not found or shows as revoked, it may be operating illegally, warranting a report to the SEC Enforcement and Investor Protection Department (EIPD).

Steps to Verify Lending License

The lending license (CA) is distinct from general registration and specifically authorizes lending activities.

Step 1: Confirm the Company's Nature

Determine if the company is a "lending company" as defined under RA 9474: Entities principally engaged in granting loans from their own funds.
Exclude banks (regulated by BSP) or cooperatives (under Cooperative Development Authority).

Step 2: Search SEC's Lending Company Database

On the SEC website, navigate to the "Regulated Entities" or "Lending Companies" section.
Use the searchable list of licensed lending companies, which includes:
- Company name and CRN.
- Date of issuance of CA.
- Scope of authority (e.g., nationwide or regional operations).
- Status (active or revoked).
The SEC maintains an updated "Masterlist of Lending Companies" downloadable in PDF format.

Step 3: Verify Compliance and History

Check for the company's submission of required reports, such as the Annual Report on Lending Operations.
Review any SEC memoranda or circulars (e.g., SEC Memorandum Circular No. 19, Series of 2019, on online lending platforms) for additional requirements, especially for fintech or online lenders.
For online lending apps, ensure compliance with SEC MC No. 10, Series of 2020, which mandates registration for digital platforms.

Step 4: In-Person or Formal Inquiry

Visit SEC's Corporate Finance Department or Licensing Unit.
Submit a formal request for verification, providing the company's details.
If suspicions arise, file a complaint or query via SEC's hotline or email.

Note: The CA must be renewed periodically (every 3 years), so check the expiration date.

Additional Verifications and Best Practices

Check for Complaints and Sanctions

Review SEC's "Advisory" or "Warning" sections for blacklisted entities or cease-and-desist orders (CDOs).
Cross-reference with the BSP's list of authorized non-bank financial institutions if there's overlap.
Use the Integrated Bar of the Philippines (IBP) or court databases (e.g., Supreme Court e-Library) for any litigation involving the company.

Red Flags Indicating Potential Issues

Company claims exemption from registration (rarely valid for finance firms).
High-interest rates exceeding legal limits (e.g., over 6% per month for unsecured loans).
Lack of physical office or reliance solely on online presence without SEC-listed details.
Pressure tactics, hidden fees, or refusal to provide loan contracts compliant with Truth in Lending Act (Republic Act No. 3765).
Affiliation with known scams, such as investment schemes disguised as lending.

Consumer Protection Measures

Under the Consumer Act (Republic Act No. 7394) and Financial Consumer Protection Act (Republic Act No. 11765), borrowers have rights to fair treatment.
Report violations to SEC, BSP, or the Department of Justice (DOJ) for criminal angles.
For data privacy concerns in lending (e.g., app permissions), check compliance with the Data Privacy Act (Republic Act No. 10173) via the National Privacy Commission.

Special Considerations for Online and Fintech Lenders

With the rise of digital lending, SEC regulates platforms under RA 9474 and related circulars.
Verify if the app or website displays the SEC CA number prominently.
Check app stores for reviews and ensure the developer matches the registered entity.

Conclusion

Verifying a finance company's SEC registration and lending license is essential for due diligence in the Philippine financial landscape. By following the outlined steps, individuals can confirm legitimacy, ensure regulatory compliance, and protect against fraud. Always remember that while online tools facilitate quick checks, official confirmations from the SEC provide the highest assurance. If in doubt, engage a lawyer or financial advisor familiar with Philippine securities and lending laws. Staying informed empowers consumers and promotes a transparent financial ecosystem. For the latest updates, refer directly to SEC issuances or consult relevant authorities.