Interest-Rate Cap Rules for Online Lending Platforms in the Philippines

Updated for the Philippine regulatory landscape as of 2025.

1) Quick thesis

For online lending platforms (OLPs) operating in the Philippines—typically front ends for lending companies (LCs) or financing companies (FCs) licensed by the Securities and Exchange Commission (SEC)—there is no single, universal statutory “usury ceiling” that numerically caps all loan interest. The historic Usury Law ceilings were effectively suspended decades ago. However, this does not mean “anything goes.” OLP pricing is constrained by:

SEC supervision (licensing, platform registration, conduct rules, and the power to issue directives limiting charges and practices);
Disclosure obligations (Truth-in-Lending principles and effective interest rate/EIR transparency);
Civil Code and jurisprudence on unconscionable or excessive interest and penalties;
Consumer protection norms (unfair terms; abusive collection bans); and
Special caps that apply to other products (e.g., credit cards under BSP rules) which do not automatically apply to SEC-supervised OLP loans.

Result: In practice, platforms must price within a defensible, disclosed, and reasonable total cost of credit, or risk rescission, rate reduction by courts, SEC sanctions, and reputational enforcement.

2) Supervisory map: who regulates what

SEC — primary regulator for LCs/FCs and their OLPs (licensing; operational/fit-and-proper; disclosure; collection; data handling; ad rules; platform registration/approvals).
Bangko Sentral ng Pilipinas (BSP) — regulates banks and credit card issuers; has explicit numerical caps for credit cards (these do not per se govern SEC-licensed OLPs).
Department of Trade and Industry (DTI) — consumer-protection enforcement for unfair or misleading trade practices in general commerce and advertising (complementary to SEC).
National Privacy Commission (NPC) — data-protection and lawful processing of borrower information (consents, purpose limitation, minimization).
Local Government/Enforcers — assist on ground operations; cannot override national financial-sector rules.

3) The (non-)usury rule, explained

The Philippines’ Usury Law once set ceilings; later central-bank circulars removed/ceased to enforce those ceilings, leaving pricing to the market subject to law and equity.
Courts have consistently held that excessive or unconscionable interest/penalties may be reduced or struck down even without a fixed statutory cap. This applies to contractual interest, penalty interest, service charges used as interest substitutes, and default fees.

Takeaway for OLPs: You can’t hide behind “no cap.” If total charges shock the conscience, a judge can pare them back; the SEC can also proceed against unfair practices.

4) What actually constrains OLP pricing

a) SEC licensing & platform rules

Only SEC-licensed LCs/FCs may operate or be served by an OLP.
OLPs generally must be registered/cleared with the SEC; “rogue apps/sites” face takedown and criminal/administrative action.
The SEC may prescribe, limit, or prohibit specific fees (e.g., “processing,” “convenience,” “verification”) and collection practices. Re-characterized interest (fees deducted up-front) counts toward the effective cost.

b) Truth-in-Lending & EIR transparency

Lenders must clearly disclose: nominal rate, effective interest rate (EIR), tenor, amortization, all fees (one-off and recurring), prepayment and default charges.
EIR must annualize the total cost, factoring cash-net-of-fees disbursed (i.e., if you deduct fees at disbursement, the EIR rises).
Headline “per-day” or “per-month” rates are insufficient if they obscure the true all-in cost.

c) Unconscionability & penalty moderation

Contractual interest far above market, stacked fees, and punitive penalties are vulnerable.
Penalty interest (on top of regular interest) can be reduced if it amounts to unjust enrichment or double recovery.
Liquidated damages must be reasonable and tied to actual loss.

d) Consumer-protection standards

No misleading ads (e.g., “0%” while loading hidden fees).
No forced bundling of optional add-ons (insurance, membership) as loan approval conditions unless clearly optional and consented.
No abusive collection (threats, doxxing, unauthorized contact scraping, workplace shaming). Violations can lead to license revocation and criminal exposure.

e) Data privacy gating

Data minimization: require only data necessary for underwriting/servicing.
No covert phonebook scraping; access rights must be specific and proportionate.
Purpose limitation: marketing use requires separate, revocable consent.

5) What is capped today—and what isn’t

Credit cards (BSP-regulated): subject to explicit monthly caps and fee limits for card products only. These do not automatically apply to OLP loans of SEC-licensed LCs/FCs.
SEC-supervised OLP loans: no universal numeric cap across all unsecured consumer loans. The SEC may impose product-specific restrictions by circular (e.g., on short-term, small-ticket loans), and has the power to treat disguised charges as interest for compliance.
Microfinance by banks/NGOs may have programmatic pricing guardrails, but these are not blanket caps for private OLPs.

Practical risk line: High per-day nominal rates combined with front-loaded fees and steep penalties are the fastest path to findings of unconscionability and SEC enforcement.

6) Building a compliant pricing stack (for platforms)

Define the product: principal, tenor, repayment frequency, grace days.
List every charge: interest, origination/processing, disbursement, verification, convenience, distribution partner fees, insurance, late fee, penalty rate, collection fee, prepayment fee.
Compute and publish EIR/APR based on cash-in-hand to borrower.
Ban “fee pyramids.” If a fee recurs monthly, disclose it as such; if deducted at disbursement, include it in EIR.
Cap penalties internally (e.g., a hard peso cap or short penalty window) and stop-accrual rules after charge-off.
Offer prepayment without penalty (or with nominal admin fee only).
Cooling-off (e.g., 24–48 hours) where operationally feasible: allows cancellation with minimal cost.
Plain-language key facts sheet (KFS): one page with total repayable, installment amount, EIR/APR, late fees, collection policy summary, contacts for complaints.

7) Borrower rights & remedies

Right to know: receive the KFS, EIR/APR, total repayable, and fee breakdown before contracting.
Right to fair collection: freedom from harassment, public shaming, contact-list blasting, or threats.
Right to data protection: withdraw marketing consent, demand access/correction, complain to the NPC for misuse.
Right to challenge unconscionable terms: courts may reduce or nullify interest/penalties; regulators can sanction and order restitution.
Right to complain: to the SEC (licensing/conduct), DTI (misleading ads), NPC (privacy), and local enforcers (if criminal acts occur).

8) Enforcement patterns (what gets firms in trouble)

Advertising “as low as 0%” while charging heavy up-front deductions.
Daily rates that annualize into triple-digit EIRs without frank disclosure.
Stacked penalties (penalty interest + late fee + collection fee) compounding simultaneously.
Contact scraping and sending mass messages to a borrower’s relatives/co-workers.
Unlicensed operation or using a “marketplace” façade to intermediate loans for unlicensed parties.

9) Documentation standards for defensible pricing

Board-approved pricing policy: ranges by segment, tenor, and risk grade; rationale tied to cost of funds and loss expectations.
Model documentation: underwriting models, reject-inference and fairness checks.
Fee policy: which fees exist, why, when charged, how calculated, and refundability.
Change-management: versioned key facts sheets and disclosures; audit trail of what a borrower saw and agreed to.
Vendor governance: contracts with collection agencies and data vendors; conduct codes mirrored to SEC rules.

10) Designing for hardship & sustainability

Grace periods and hardship programs (interest/fee waivers, rescheduling) reduce regulatory risk.
Interest/fee stop rules after charge-off or at a set delinquency age.
No prepayment penalties; allow partial prepayments to cut interest burden.
Early warning nudges (SMS/app) that are informative, not harassing.

11) Checklist: Are we inside the guardrails?

Are we licensed (LC/FC) and is the OLP registered/cleared?
Do we compute and display EIR/APR based on net cash received?
Are all fees disclosed plainly and counted toward EIR?
Do we avoid stacked penalties and set reasonable caps on late charges?
Are scripts/templates free of coercive or shaming language?
Is data collection proportionate and consented, with no contact scraping?
Do we maintain a one-page KFS and proof of borrower acknowledgment?

12) Frequently asked questions

Do BSP credit-card caps control my OLP loan pricing? No. Those caps apply to card issuers and card products. OLPs supervised by the SEC must follow SEC rules, disclosure/EIR, and unconscionability limits.

Can we charge a “processing fee” and still say 0% interest? Only if the total cost is transparent and EIR/APR is disclosed. “0%” headlines with large fees are misleading and risky.

Is a per-day interest quote acceptable? Yes for marketing clarity, but you must also disclose the annualized EIR/APR and total repayable.

Can penalty interest continue indefinitely? It shouldn’t. Courts frown on perpetual compounding. Adopt stop-accrual points and reasonable caps.

If there’s no cap, why do peers use 2–4%/month? Because that range often survives scrutiny when fees are modest and EIR is plainly disclosed—but reasonableness depends on tenor, risk, and practices. Outliers invite challenges.

13) Model “Key Facts Sheet” (borrower-facing)

Loan amount (approved): ₱10,000
Cash disbursed (after fees): ₱9,500
Tenor & schedule: 3 months, monthly amortization
Nominal interest: 3.0%/month
Fees: ₱300 processing (one-time), ₱200 disbursement (one-time)
Total repayable: ₱11,235
EIR/APR (estimated): disclose computed annualized rate
Late fee & penalty interest: specify exact amounts/caps and grace days
Prepayment: allowed anytime; no penalty; pay accrued interest to date only
Collections & privacy: summary plus links to full policies and regulator contacts

14) Bottom line

The Philippines does not impose a one-size-fits-all interest-rate cap on SEC-supervised online consumer loans, but platforms are tightly constrained by SEC licensing, disclosure/EIR rules, consumer-protection standards, data-privacy limits, and the judiciary’s power to strike down or reduce unconscionable charges. Successful, durable OLPs price transparently, keep fees lean, cap penalties, respect privacy, and maintain clean collection practices—not because a single number says so, but because regulators and courts will force the outcome if they don’t.