Legal Lending Company Verification in the Philippines
A comprehensive legal overview (July 2025)
1. What Counts as a “Lending Company”?
| Statute | Key Definition |
|---|---|
| Republic Act No. 9474 – Lending Company Regulation Act of 2007 (LCRA) | A corporation engaged “in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons.” — Excludes: banks, quasi-banks, pawnshops, insurance cos., cooperatives, microfinance NGOs, GSIS/SSS, and similar entities. |
Practical tip: If the entity accepts deposits or issues e-money it falls under Bangko Sentral ng Pilipinas (BSP) jurisdiction and is not a “lending company” under the LCRA.
2. Mandatory Licences & Authorities
Securities and Exchange Commission (SEC)
- Primary licence: Certificate of Incorporation (CI).
- Secondary licence: Certificate of Authority (CA) to Operate as a Lending Company — no CA, no lending.
Minimum Paid-In Capital
- ₱1 million (RA 9474, Sec. 6).
- If > 40 % foreign-owned, Foreign Investments Act rules apply — at least US $200 000 unless exporting or employing at least fifty (50) Filipinos.
Supplementary Registrations
- Anti-Money Laundering Council (AMLC) – as a covered person (Sec. 3(b)(5) AMLA).
- National Privacy Commission (NPC) – Data Privacy Act registration for systems processing personal data.
- Credit Information Corporation (CIC) – compulsory credit data submission (RA 9510, Sec. 4-5).
3. SEC Verification Process (Consumer & Due-Diligence Perspective)
| Step | How to Verify | What to Look For |
|---|---|---|
| 1 | Visit SEC’s “Registered Lending Companies With CA” list (updated monthly on <sec.gov.ph data-preserve-html-node="true">). | • Exact corporate name • Company Reg. No. • CA No. & issue date • Current status (“Active”, “Revoked”, “Expired”). |
| 2 | Use SEC Express System or eSPARC portal to download the company’s latest General Information Sheet (GIS). | Confirms officers, address, authorized capital, paid-in capital. |
| 3 | Check BSP “List of BSFIs” if the entity advertises deposit-taking or e-wallet features. | If listed, it is not under the LCRA; it should be a bank or EMI. |
| 4 | Cross-check with LGU Business Permit & Licensing Office (BPLO). | Valid Mayor’s/Business Permit + Barangay Clearance. |
| 5 | Scan SEC’s Enforcement Advisories & Revocation Orders. | Names of companies/OLPs banned or with CA revoked. |
Red Flags:
- CA number missing or unverifiable
- Corporate name v. trade name mismatch
- Foreign-owned firm with paid-in capital below US$200 k
- Recently revoked OLPs still marketing apps in app stores
4. Special Rules for Online Lending Platforms (OLPs)
| Circular | Highlights (selected) |
|---|---|
| SEC Memorandum Circular 18, s. 2019 | Prohibits unfair debt-collection practices (public shaming, threats, use of > 3 collection contacts, etc.). |
| SEC Memorandum Circular 19, s. 2019 | • Each lending co. may register only one OLP. • Registration fee ₱50 000 + ₱10 000 annual. |
| SEC Memorandum Circular 3, s. 2022 | Interest-rate cap: 6 % per month nominal interest; 15 % per month effective charges cap (includes penalties & fees). |
Apps found operating without a registered OLP face immediate takedown requests to Google Play / App Store and cease-and-desist orders.
5. Applicable Consumer-Protection Laws
- Truth in Lending Act (RA 3765) – mandatory disclosure of annual interest rate, fees, and loan schedule.
- Financial Products and Services Consumer Protection Act (RA 11966, 2022) – empowers SEC to suspend or close abusive lending companies and impose hefty fines (up to ₱10 million + disgorgement).
- Data Privacy Act (RA 10173) – limits data harvesting; requires lawful, proportional processing.
- BSP-SEC-IC Joint Memorandum Circular 1-2023 – unified complaints handling standard (48-hour acknowledgment, 10-work-day resolution).
6. Penalties for Unlicensed or Non-Compliant Lending
| Violation | Statutory Basis | Penalty |
|---|---|---|
| Operating without CA | RA 9474, Sec. 16 | Fine ₱50 000-₱100 000 and/or imprisonment 6 mos-10 yrs. |
| Violating interest-rate cap | SEC MC 3-2022 | Fine up to ₱1 million + revocation of CA. |
| Harassment, threats, shaming | SEC MC 18-2019; RA 11966 | Cease-and-desist order, app takedown, fines, criminal action under RPC (grave threats, unjust vexation). |
| AMLA non-registration | AMLA Sec. 4-14 | Fine up to ₱3 million + possible imprisonment of officers. |
7. Interaction With Other Lending-Related Regimes
| Regime | When It Applies | Verifying Body |
|---|---|---|
| Finance Company Act (RA 8556) | If the entity’s loan funding comes from > 19 lenders or debt instruments issued to the public. | SEC – Corporate Finance Dept. |
| Microfinance NGOs Act (RA 10693) | Non-profit NGOs granting micro-loans to marginalized sector. | SEC – Corporate Governance & Finance; Microfinance NGO Regulatory Council. |
| Cooperative Code (RA 9520) | Credit cooperatives. | Cooperative Development Authority (CDA). |
| Pawnshop & Money Service Biz | Takes pledged personal property or engages in FX, remittance, e-money. | BSP – Financial Supervision Sector. |
8. Checklist for Lawyers & Compliance Teams (Due Diligence)
- Corporate Documents – SEC CI, CA, latest GIS, Articles & By-Laws amendments.
- Capital Verification – audited FS to confirm paid-in capital ≥ ₱1 million (or US $200 k if foreign-dominated).
- Regulatory Filings – CA renewal (every three years), SEC “Form LCF-1” annual report, AMLC accreditation certificate, NPC registration.
- OLP Registration – MC 19-2019 certificate + Google/Apple developer console screenshots.
- Loan Documents Audit – compliance with RA 3765 disclosures; review of interest, fees, penalty matrix vis-à-vis MC 3-2022.
- Collection Practice SOPs – scripts, letters, call recordings; ensure no blacklisted conduct (MC 18-2019).
- Consumer Complaint Ledger – log and resolution timeline per RA 11966 IRR.
- Advertising Review – confirm claims match CA authority; no “bank-like” jargon such as “deposit,” “savings,” “wallet” unless BSP-licensed.
9. Enforcement & Remedies for the Public
- File a Complaint – SEC Enforcement and Investor Protection Dept. (EIPD) via complaints@sec.gov.ph or the online e-Complaint Form.
- Coordinated Operations – SEC + PNP + NBI cyber-crime raids on unlicensed call-centers/OLPs.
- Civil Action – Borrower can sue for refund of interest and penalties collected in excess of statutory caps (Civil Code Art. 1175 & Art. 1398).
- Criminal Action – Department of Justice (DOJ) prosecution for RA 9474 or RPC offenses.
10. Emerging Issues (2024-2025)
| Issue | Status (July 2025) |
|---|---|
| Predatory Lending Prevention Bill | Approved by House (HB 9344). Proposes mandatory 30-day “cooling-off” and caps on effective interest ≤ 100 % p.a. Senate deliberations ongoing. |
| Digital National ID Integration | SEC exploring API tie-in to PhilSys for borrower verification and KYC. Pilot sandbox with 10 lending firms. |
| AI-Driven Credit Scoring Oversight | Draft SEC memorandum (exposed June 2025) would require algorithmic transparency reports and bias testing for OLPs using automated risk scoring. |
| Regional Expansion | ASEAN agreement on cross-border lending disclosures under discussion; potential passporting for licensed lenders by 2026. |
11. Consumer “Self-Verification” Quick Guide
- Search SEC list → confirm CA.
- Download SEC GIS → verify directors/officers.
- Check OLP Registry → look for the app name; one app per lending firm.
- Read the fine print → look for APR, not just monthly rate.
- Verify collection contacts → only third-party agencies listed in the GIS are lawful.
- Red Flag: Demands upfront “processing fee” > ₱1 000 before loan approval.
12. Conclusion
Verifying a Philippine lending company is essentially a regulatory compliance audit anchored on the SEC’s Certificate of Authority plus a web of allied regulations (AML, privacy, consumer finance, digital-platform conduct). With coordinated databases and interest-rate caps now in force, both borrowers and legal practitioners can quickly separate legitimate lenders from underground operators. Due diligence is document-driven: if an entity cannot produce—or be found in—SEC registries, it is not legally allowed to lend.
This article reflects laws, regulations, and publicly released draft measures as of 17 July 2025. Always check for subsequent SEC circulars or legislative amendments before relying on this guide.