In the Philippines, the rise of digital finance has led to a proliferation of lending platforms and financing companies. While this increases access to credit, it also opens the door to predatory lending and "loan sharks." 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), all entities engaged in the business of lending must be registered with the Securities and Exchange Commission (SEC).
Verifying a company’s legitimacy is not just a precaution; it is a critical step in ensuring that your consumer rights are protected under the law.
The Legal Requirement for Lending Entities
Before a company can legally lend money to the public, it must secure two distinct items from the SEC:
- Certificate of Incorporation: This proves the entity is a registered corporation.
- Certificate of Authority (CA) to Operate as a Lending/Financing Company: This is the specific license required to engage in lending activities.
Note: A company may be a registered corporation but not authorized to lend money. Operating a lending business without a CA is a criminal offense.
Step-by-Step Verification Process
The SEC provides several public tools to verify the status of a company. Follow these steps to ensure you are dealing with a legitimate entity.
1. Check the SEC Official Website
The most reliable method is to consult the lists maintained by the SEC Corporate Governance and Finance Department.
- Visit the SEC Philippines website.
- Navigate to the "Lending Companies" or "Financing Companies" sections under the "Public Information" or "Checklist" tabs.
- The SEC regularly updates lists of:
- Registered Lending Companies
- Registered Financing Companies
- Lending Companies with Revoked/Suspended Certificates of Authority
2. Verify Online Lending Platforms (OLPs)
Many legitimate lending companies operate through mobile apps. To curb the rise of illegal "online loans," the SEC requires registered companies to report their official platforms.
- Check the "List of Online Lending Platforms" on the SEC website.
- If the app name or developer is not explicitly listed as an authorized platform of a registered company, it is likely operating illegally.
3. Inspect the Physical Certificate of Authority
If you are visiting a physical office, the law requires the company to display its Certificate of Authority prominently in its place of business.
- Check the CA Number.
- Verify the Company Name (ensure it matches the name used in advertisements).
- Look for the SEC Official Seal and the signature of the SEC Chairperson or authorized officials.
Red Flags of Illegal Lenders
If a company is not registered, they often exhibit "fly-by-night" characteristics. Be wary if you encounter the following:
| Feature | Legitimate (SEC-Registered) | Illegal (Unregistered) |
|---|---|---|
| Interest Rates | Disclosed clearly in a Disclosure Statement | Hidden charges and predatory rates |
| Contact Info | Has a physical office and official email | Operates only via social media or SMS |
| Requirements | Standard KYC (IDs, proof of income) | Asks for access to your entire contact list |
| Methods | Regulated collection practices | Harassment, debt-shaming, or threats |
Legal Protections for Borrowers
Dealing with an SEC-registered company grants you protections under the Truth in Lending Act (Republic Act No. 3765). Registered lenders are required to:
- Provide a Disclosure Statement before the loan is consummated.
- Clearly state the cash price, down payment, finance charges, and the effective annual interest rate.
- Adhere to SEC Memorandum Circular No. 18 (Series of 2019), which prohibits unfair debt collection practices (e.g., using profane language, disclosing borrower information to third parties, or making false representations).
What to Do If a Lender is Not Registered
If you discover that a company is lending money without a Certificate of Authority, or if a registered company is engaging in harassment, you should take the following actions:
- Report to the SEC: Send a formal complaint to the SEC Enforcement and Investor Protection Department (EIPD) via email at
epd@sec.gov.ph. - Contact the National Privacy Commission (NPC): If the lender is harvesting your phone contacts or shaming you online, this is a violation of the Data Privacy Act of 2012.
- Coordinate with Law Enforcement: For threats of violence or grave coercion, report the incident to the PNP Anti-Cybercrime Group (ACG) or the NBI Cybercrime Division.
Verification is the primary defense against financial exploitation. Always "Check the SEC" before signing any loan agreement or downloading a lending application.