In the Philippines, the rise of digital lending platforms and "fintech" apps has made access to credit easier than ever. However, this convenience has also opened the door for predatory lenders and unregistered entities. For a lending or financing company to operate legally, it must clear two distinct hurdles with the Securities and Exchange Commission (SEC).
Here is a comprehensive legal guide on how to verify a lender's legitimacy and the statutory requirements they must follow.
1. The Two-Step Verification Process
Many borrowers mistakenly believe that a "Registered" company is automatically authorized to lend money. Under Philippine law, specifically the Lending Company Regulation Act of 2007 (R.A. 9474) and the Financing Company Act of 1998 (R.A. 8556), a company needs two specific documents:
A. Certificate of Incorporation (SEC Registration)
This proves the company is a registered legal entity. However, a company can be registered for "consultancy" or "trading" and still lack the authority to lend.
B. Certificate of Authority (CA)
This is the critical document. No lending or financing company can operate unless it has been granted a Certificate of Authority to Operate as a Lending/Financing Company.
Legal Tip: Operating a lending business without a CA is a criminal offense punishable by fines and imprisonment.
2. How to Verify via the SEC Website
The SEC maintains an updated database of entities authorized to provide loans. To verify a company, follow these steps:
- Visit the SEC Official Website: Go to sec.gov.ph.
- Access the "Lending & Financing" Section: Look for the "Public Information" or "Lending and Financing Companies" tab.
- Check the Lists: The SEC periodically publishes two vital lists:
- List of Registered Lending Companies
- List of Registered Financing Companies
- Verify the CA Number: Match the Certificate of Authority (CA) number displayed on the lender's app or office wall with the SEC’s official master list.
3. Red Flags of Illegal Lenders
If you are dealing with a lender that exhibits the following traits, they are likely unregistered or operating in violation of SEC Memorandum Circular No. 18:
- No SEC Disclosure: They cannot provide a CA number or a SEC Registration number.
- Aggressive Collection: Use of threats, shaming, or accessing your phone’s contact list (a violation of the Data Privacy Act).
- Unreasonable Fees: Hidden charges that are not clearly stated in the Disclosure Statement required by the Truth in Lending Act.
- Generic Names: Using names that mimic established banks or government agencies to mislead the public.
4. Mandatory Disclosures
Under the Truth in Lending Act (R.A. 3765), every lender is legally required to provide you with a Disclosure Statement before the loan transaction is consummated. This document must include:
| Requirement | Description |
|---|---|
| Cash Price/Principal | The actual amount you are borrowing. |
| Finance Charges | Interest, service fees, and any other costs. |
| Effective Interest Rate | The total cost of the loan expressed as a yearly percentage. |
| Schedule of Payments | Exactly when and how much you need to pay. |
Note: Failure to provide this statement does not void the loan, but it exempts the borrower from paying the finance charges and may penalize the lender.
5. What to Do if the Lender is Unregistered
If you discover a company is lending without a Certificate of Authority, or if they are engaging in unfair debt collection practices:
- Cease Communication: Do not provide further personal data.
- File a Formal Complaint: Contact the SEC Corporate Governance and Finance Department (CGFD) via email at
cgfd_enforcement@sec.gov.ph. - Report to the NPC: If they are shaming you online or hacking your contacts, file a complaint with the National Privacy Commission (NPC).
Summary Checklist
- Does the company have a Certificate of Incorporation?
- Does the company have a Certificate of Authority (CA) to lend?
- Is the CA number listed on the SEC website?
- Did they provide a Disclosure Statement before you signed?
Would you like me to draft a formal demand letter or a complaint template for the SEC regarding an unregistered lender?