Legitimacy Check for Lending Company Registration

(Philippine legal and regulatory perspective – updated to 15 May 2025)

1. Why legitimacy matters

Unregistered or improperly licensed lenders expose borrowers to usurious pricing, privacy abuses and collection harassment, while investors and officers can incur criminal liability. Philippine regulators now treat rogue online-lending operators in much the same way they treat pyramid schemes or unlicensed securities brokers, imposing cease-and-desist orders, multimillion-peso fines and even imprisonment. (Inquirer Business, RESPICIO & CO.)

2. Core legal framework and regulators

Instrument	Key effect on lending companies	Principal regulator
Republic Act (RA) 9474 – Lending Company Regulation Act of 2007	Requires a Certificate of Authority (CA) from the SEC before any corporation “engage[s] in or hold[s] itself out as engaging in the business of granting loans from its own capital funds.”	Securities and Exchange Commission (SEC) (Lawphil)
RA 8556 – Financing Company Act of 1998	Parallel CA regime for financing companies (FCs) with higher minimum capital and looser foreign-equity limits.	SEC
RA 10881 (2016)	Caps foreign ownership of lending companies at 49 %; FCs may be 100 % foreign-owned.	SEC (Lawphil)
RA 11765 – Financial Products and Services Consumer Protection Act (FPSCPA, 2022)	Elevates existing SEC circulars on disclosures, abusive collection and refunds to statutory level; authorises fines up to ₱2 million per violation plus ₱100 k per day of continuing breach, and restitution to victims.	SEC, Bangko Sentral ng Pilipinas (BSP), Insurance Commission, CDA (Senate of the Philippines)
SEC Memorandum Circular (MC) 18-2019	Requires separate SEC approval for every Online Lending Platform (OLP) or mobile app used to originate, approve, disburse or collect loans.	SEC (RESPICIO & CO.)
SEC MC 19-2019	Lists unfair or abusive collection practices and mandates prominent disclosure of SEC Reg. No. & CA No. in all ads and on each OLP.	SEC (Scribd)
SEC MC 10-2021 / MC 10-2022	Declared an ongoing moratorium on new OLP applications while the rules are overhauled.	SEC (RESPICIO & CO.)
BSP Circular 1133 (2021)	Sets interest-rate and fee ceilings for small, short-term consumer loans (≤ ₱10 k; ≤ 4 months): 6 % nominal p.m.; 15 % effective p.m.; penalties ≤ 5 % p.m.; total cost cap = 100 % of principal.	BSP
Data Privacy Act (10173) & Anti-Money Laundering Act (9160)	Require an NPC-registered Data Protection Officer, privacy-impact assessment, and AML program.	National Privacy Commission (NPC), Anti-Money Laundering Council

3. “Lending” vs “Financing” company — know the difference

Criterion	Lending Company (LC)	Financing Company (FC)
Paid-up capital (minimum)	₱1 million (draft 2025 rules propose ₱25 million for digital-only lenders) (RESPICIO & CO.)	₱10 million
Foreign equity	Max 49 % voting stock (RA 10881) (Lawphil)	Up to 100 %
Typical product	Consumer or salary loans funded solely from own capital	Asset-backed or business loans; may re-lend borrowed money
Regulator	SEC	SEC (banks are BSP-licensed)

4. The two-stage licensing workflow

Stage A – Certificate of Authority (CA) File after incorporation but before any lending activity. Core filings: Treasurer’s Affidavit & bank certificate for paid-up capital; Personal Information Sheets; five-year business plan; draft AML & consumer-protection manuals; surety bond or escrow. (RESPICIO & CO.)
Stage B – OLP Approval (if digital) Submit SEC Form OLP-1, process-flow diagrams, screen shots or video walk-through, server locations, third-party contracts, IT-security self-assessment, and NPC Certificate. No separate entity is needed, but each website or app must be cleared (and the moratorium still applies as of May 2025). (RESPICIO & CO.)

Processing time (pre-moratorium): ± 6 months end-to-end.

5. Continuing compliance “always-on” obligations

Domain	Obligation	Potential sanction for breach
Disclosure & Advertising	Always display SEC Reg. No. & CA No. on site, app store listing, SMS, push notices.	Fine up to ₱2 M + ₱100 k/day; CA suspension (FPSCPA) (Scribd, Senate of the Philippines)
Interest & Fees	Follow BSP Circular 1133 caps for covered loans; disclose APR/EIR.	Refund of excess + fines; possible CA revocation
Collections	Prohibited acts under MC 19-2019: threats, profanity, public shaming, scraping phone contacts, deceptive messages.	CA suspension/revocation; directors may face cyber-libel, voyeurism or harassment suits (Scribd, RESPICIO & CO.)
Data privacy	Granular borrower consent; no bulk scraping; privacy manual & NPC registration.	NPC fine up to ₱5 M per violation (RESPICIO & CO.)
AML/CFT	Register with AMLC, file CTRs/STRs, appoint Compliance Officer.	AMLC administrative penalties + criminal
Reportorial	GIS (30 days), Audited FS (120 days), Quarterly OLP Performance (15 days), monthly upload to Credit Information Corporation.	₱1 k per day per late filing (RESPICIO & CO.)

6. How to verify legitimacy — a borrower’s or investor’s checklist

Search the SEC’s “Check with SEC” portal. Type the corporate name or SEC Reg. No. The result page shows:
- corporate registration status;
- secondary licence type (e.g., “CA as Lending Company”);
- suspension/revocation flags. (Check with SEC)
Match the Certificate numbers. A legitimate lender will quote both its SEC Reg. No. and CA No. in every ad, SMS, website footer and app-store description as required by MC 19-2019. (Scribd)
Cross-check the suspended / revoked list. The portal’s “Suspended Corporations” tab is updated in near real time and reflects cease-and-desist orders. (Check with SEC)
Verify the app itself.
- Google Play and Apple App Store automatically delist Philippine lending apps without an active CA as of 31 Jan 2024. (Respicio & Co.)
- An app that is side-loaded (APK download) or not visible in PH stores is almost always illegal.
Look for a Data-Privacy Notice and NPC Registration No. Abusive apps often omit it.
Ask for the Disclosure Statement under RA 9474. Lenders must supply a form that shows principal, interest, fees, EIR and total cost. Refusal is a red flag.

7. Red flags signalling an unlicensed lender

No SEC or CA numbers in ads/ messages.
Interest quoted as daily percentage (e.g., “1 % per day”) or exceeds BSP caps for small-ticket loans.
Collection harassment of contacts not designated by the borrower.
App is side-loaded or cannot be found in PH app stores.
Requests advance “processing fee” before release of funds.

8. Enforcement snapshot (2019 – May 2025)

145 LCs/FCs have lost their CAs for operating unregistered apps. (RESPICIO & CO.)
June 26 2024: SEC issued cease-and-desist orders (CDOs) against six errant lenders (9F Lending, Elending, etc.). (Inquirer Business)
Feb 2023: 33 illegal OLPs removed from Google Play at SEC’s request. (ABS-CBN)

9. Sanctions & remedies

Violation	Administrative penalty	Criminal exposure
Operating without CA	₱10 k – ₱50 k + ₱1 k/day; CDO; asset freeze	6 months – 10 years imprisonment (RA 9474 §13) (Lawphil)
Operating an unapproved OLP	Up to ₱2 M + ₱100 k/day; restitution (RA 11765)	Estafa / cyber-crime if fraud proven (Senate of the Philippines)
Unfair collection	CA suspension/revocation; directors/officers disqualification	Cyber-libel / anti-voyeurism cases (Scribd, RESPICIO & CO.)

Victims may complain to the SEC’s Financing & Lending Companies Division (online or walk-in) and to the NPC for privacy breaches. The SEC can order immediate take-down of the offending app while the case is pending. (RESPICIO & CO.)

10. Upcoming reforms

Draft “Digital Financing and Lending Rules” (SEC, Jan 2025):
- Proposed paid-up capital = ₱25 million for digital-only lenders;
- Mandatory resident Chief Technology Officer;
- API connection to PhilSys e-KYC gateway;
- Moratorium on new OLPs expected to lift once rules are final (target Q4 2025). (RESPICIO & CO.)

11. Practical summary – 60-second checklist

Search “Check with SEC” → Confirm active CA.
Match numbers in every message/app listing.
Review the Disclosure Statement before you sign.
Spot BSP cap breaches. Anything over 15 % EIR p.m. on a ≤ ₱10 k / ≤ 4-month loan is illegal.
Save screenshots/call logs – vital evidence for SEC/NPC complaints.

12. Conclusion

Legitimacy checking in the Philippines is no longer a cursory glance at an SEC registration paper. It now requires verifying both primary corporate registration and the specialised Certificate of Authority, ensuring online platforms have separate SEC clearance, confirming compliance with BSP pricing caps, and watching for collection and privacy red flags. The regulatory net has tightened dramatically since 2019, and with the 2025 digital-lending rules on the horizon, the bar will only rise. Borrowers, investors and fintech founders alike should treat compliance not as an after-thought but as the foundational design principle of any lending venture.