Legitimacy Verification of Lending Companies in the Philippines
A comprehensive legal guide as of 24 April 2025
1. Why verification matters
Unlicensed or rogue lenders (“flies-by-night,” 5–6 operators, abusive online apps) expose borrowers to (1) usurious charges, (2) data-privacy violations, (3) harassment and shaming, and (4) limited legal recourse. Republic Act (RA) 9474 makes it a criminal offense to engage in lending as a business without a Certificate of Authority (CA) from the Securities and Exchange Commission (SEC).
2. Governing statutes, rules and regulators
| Regulator | Key laws / rules | Scope relevant to lending |
|---|---|---|
| Securities and Exchange Commission (SEC) | • RA 9474 (Lending Company Regulation Act of 2007) • RA 8556 (Financing Company Act, as amended) • SEC Memorandum Circulars (MC) 18-A s.2020, 19 s.2019, 28 s.2020, 01 s.2022, 09 s.2023 |
Corporations, partnerships and online-only lenders that extend credit but do not accept deposits |
| Bangko Sentral ng Pilipinas (BSP) | • RA 7653, RA 8791 (General Banking Law), MORB/MORNBFI • BSP Circular 1133 (2021) rate cap • Digital Bank and EMI regulations |
Deposit-taking banks, thrift/rural banks, credit card issuers, electronic money issuers, digital banks |
| National Privacy Commission (NPC) | • RA 10173 (Data Privacy Act) • NPC Circular 20-01 on data sharing |
All lenders that collect personal data, especially online lending apps (OLAs) |
| Anti-Money Laundering Council (AMLC) | • RA 9160, as amended • SEC MC 16 s.2018 on covered persons |
Lenders with threshold-triggering transactions must register & report |
| Department of Justice (DOJ) & LGUs | RA 11765 (Financial Consumer Protection Act) (FCP Act) | Consumer complaints, prosecution of harassment & unfair debt-collection |
3. “Lending company” vs. “financing company” vs. others
| Type of entity | License trigger | Typical products | Primary regulator |
|---|---|---|---|
| Lending company (LC) | Business of granting loans from own capital (≦49% foreign equity) | Salary, personal, micro-loans | SEC |
| Financing company (FC) | Financing of goods/services with own or borrowed funds | Installment financing, auto, SME | SEC |
| Bank / thrift / rural bank | Accepts deposits + lends | Deposit, credit card, mortgage | BSP |
| Microfinance NGO | Certified under RA 10693 | Group & livelihood loans | Microfinance NGO Regulatory Council |
| Pawnshop / money service business | Pawnbroking, remittance | Collateralized loans | BSP |
| Online Lending Platform (OLP) | Pure digital; matches lender funds to borrowers | Consumer cash loans | SEC (MC 19 s.2019) |
4. Step-by-step legitimacy check
Confirm SEC registration
Search “Business Name Registration System” or SEC’s Company Registration System (CRS/eSPARC) for the corporate name or trade name.- Must show: Registration Number/CN, date of incorporation, and Lending Company or Financing Company in purpose clause.
Validate the Certificate of Authority (CA)
- Every LC/FC must have a separate CA number (format “L-20XX-###-CA”).
- CAs can be revoked, suspended, or expired. Match the CA number and validity with SEC’s public list or request confirmation from the SEC Corporate Governance and Finance Department (CGFD).
- No CA = illegal lender, even if the corporation itself is registered.
Check for SEC Advisories & cease-and-desist orders (CDOs)
- The Enforcement and Investor Protection Department (EIPD) publishes Advisory Lists of entities flagged for unauthorised lending, abusive collection, or “pangkikil” (shaming). Presence on the list = red flag.
Verify BSP license where applicable
- If the entity advertises deposit-like products, e-wallets, fund transfers, or uses ‘bank’ in its name, confirm BSP authorisation (bank, EMI, MSB).
- Digital lenders holding an Electronic Money Issuer (EMI) or Digital Bank license must appear on the BSP “List of Supervised Financial Institutions.”
Inspect disclosures required by law
- RA 3765 (Truth in Lending Act) & BSP Memo M-2023-009 demand loan amount, annual percentage rate (APR), interest per month, penalties and all non-interest fees be shown before consummation. Hidden charges imply non-compliance.
- BSP Circular 1133 capped interest for loans ≤₱10 000 and tenor ≤4 months at 6 %/month interest + 15 % of principal on other fees.
Assess Data Privacy compliance
- Legit OLAs must publish a Privacy Notice, register their data-processing system with NPC, and obtain only “necessary, proportional” permissions (no contact scraping). Excessive app permissions → probable violation.
Confirm contact channels under SEC MC 28 s.2020
- Each LC/FC/OLP must register an official email, website URL, and phone numbers with the SEC and display them on all publicity. Lack of these, or mismatch, is a red flag.
Look for business permits & tax details
- City or municipal business permit should match the SEC-registered address.
- BIR Certificate of Registration (Form 2303) should show correct tax type (Financial Intermediary).
Check memberships / self-regulation
- While not mandatory, affiliation with FinTech Alliance.PH, Credit Association of the Philippines (CIBI), or the Chamber of Thrift Banks signals willingness to follow codes of conduct.
5. Red-flag indicators of an illegal or abusive lender
- Operates exclusively through Facebook pages, SMS blasts, or APK sideload with no SEC CA number.
- App demands access to contacts, gallery, microphone, or location not necessary for loan processing.
- Uses threats of public shaming, defamatory posts, or death-threat style collection (prohibited under RA 11765).
- Charges >6 % per month on short-term consumer loans or undisclosed “processing fees.”
- Collects up-front “approval” fees before the loan is released (advance-fee fraud).
- Offers guaranteed approval with little KYC, or asks the borrower to hand over ATM cards as collateral.
6. Borrower remedies and enforcement options
| Violation | Where / how to complain | Sanctions on lender |
|---|---|---|
| Unlicensed lending, no CA | File complaint-affidavit with SEC-EIPD | Revocation, ₱10 000 – ₱1 000 000 fine + up to 10 years’ imprisonment for officers |
| Abusive collection / harassment | SEC-CGFD (for LC/FC); BSP-CDA (if bank); PNP cybercrime; Barangay/Katarungang Pambarangay | CDO, fines, criminal cases (RA 11765) |
| Data privacy violations (contact scraping, doxxing) | National Privacy Commission | Stop-processing order, up to ₱5 000 000 fine, criminal prosecution |
| Excessive interest / hidden charges | SEC, BSP, or court action for nullity of stipulation; DTI under Consumer Act | Contract reformation; administrative fines |
| Scam / estafa | DOJ / NBI | Estafa under Art. 315 RPC; Anti-Cybercrime Act if online |
7. Practical verification checklist (print-friendly)
- Corporate name matches trade name shown in ads.
- SEC registration number & CA number appear on website, app store page, contract.
- Cross-check numbers on SEC databases or via hotline (02) 8818-0921.
- Ensure interest and fees fall within BSP Circular 1133 caps.
- Read the Privacy Notice and review requested app permissions.
- Consult SEC Advisory list; absence of any adverse advisory.
- If deposits or e-money involved, verify BSP license.
- Keep copies of loan disclosure statement, payment receipts, and screenshots of all communications.
8. Emerging issues (2024 – 2025)
- Rise of cross-border lending apps. SEC MC 09 s.2023 now requires Philippine-based servers and local directors for foreign-owned OLPs.
- Mandatory central credit registry. RA 11964 (Financial Accounts Regulation Act, 2024) will integrate SEC-registered lenders into the Credit Information Corporation (CIC) for real-time reporting.
- E-KYC via PhilSys: BSP-SEC Joint Circular 01-2024 recognizes the PhilID QR as sufficient ID for loan onboarding, reducing fake-identity lending.
- AI-driven credit scoring rules. Draft SEC circular (expected Q3 2025) will oblige lenders using algorithmic scoring to file model governance disclosures.
9. Conclusion
Verifying the legitimacy of a Philippine lending company is primarily a legal exercise: check statutory licenses (SEC CA, BSP authority), compliance with interest-rate caps, and respect for data-privacy and consumer-protection laws. The framework—anchored on RA 9474 and reinforced by newer rules on online lending and financial consumer protection—empowers borrowers to spot red flags quickly and gives regulators broad powers to shut abusive operators down. Conducting the simple checks outlined above before borrowing will help you avoid illegal lenders, predatory terms, and the distress of harassment-based collections.
Stay vigilant, document every transaction, and do not hesitate to enlist the SEC, BSP, NPC or law-enforcement agencies when you encounter suspicious or abusive lending practices.