The digital transformation of the Philippine financial landscape has led to a surge in both legitimate lending platforms and predatory "loan sharks" operating via mobile applications. For borrowers and legal practitioners alike, navigating the distinction between a SEC-licensed entity and an unauthorized lender is critical for consumer protection and legal recourse.

Under Philippine law, lending and financing activities are strictly regulated to prevent usury, harassment, and data privacy violations.

The Regulatory Framework

Lending and financing companies in the Philippines are governed primarily by two statutes, with oversight provided by the Securities and Exchange Commission (SEC):

The Lending Company Regulation Act of 2007 (Republic Act No. 9474): Regulates companies engaged in granting loans from their own capital funds or from funds sourced from not more than 19 persons.
The Financing Company Act of 1998 (Republic Act No. 8556): Regulates entities primarily organized for the purpose of extending credit facilities to consumers and industrial, commercial, or agricultural enterprises.

To operate legally, these companies must obtain two specific documents from the SEC:

Certificate of Incorporation: Proves the entity is a registered corporation.
Certificate of Authority (CA) to Operate: Specifically authorizes the corporation to engage in lending or financing. A business registration alone does not authorize a company to lend money.

Registered Lending Apps (Fintech)

With the rise of Financial Technology (Fintech), the SEC requires lending and financing companies to report their Online Lending Platforms (OLPs). A company may be a legitimate SEC-registered entity but may only operate specific, vetted applications.

Categories of Licensed Entities

The SEC maintains updated lists categorized by the type of authority granted:

Financing Companies: Generally larger entities that may also engage in leasing and factoring.
Lending Companies: Entities focused specifically on the act of lending.
Entities with Recorded OLPs: A specific registry of companies that have officially declared their mobile apps (e.g., Tala, Akulaku, Home Credit, etc.) to the SEC.

Key Compliance Requirements

Licensed companies must adhere to strict operational mandates issued by the SEC and the Bangko Sentral ng Pilipinas (BSP):

Interest Rate Caps: Per BSP Circular No. 1133, there are specific ceilings on interest rates and fees for nominal small value/short-term loans (e.g., a 6% monthly limit on nominal interest for certain loans).
Truth in Lending Act (R.A. 3765): Lenders are legally required to provide a Disclosure Statement before a loan is consummated. This must clearly show the cash price, down payment, finance charges, and the effective annual interest rate.
Fair Debt Collection Practices: SEC Memorandum Circular No. 18 (Series of 2019) prohibits "unfair debt collection practices," including:
The use or threat of violence.
Using profane or abusive language.
Disclosing a borrower’s debt information to third parties (unless authorized).
Contacting persons in the borrower's contact list without consent.

Identifying Legitimate vs. Illegal Lenders

The SEC regularly issues cease-and-desist orders (CDOs) against unlicensed apps. To verify an entity, the following steps are standard legal due diligence:

Check the SEC Website: The SEC publishes a "List of Lending Companies and Financing Companies" with revoked or suspended CAs, as well as a list of those in good standing.
Verify the CA Number: Every legitimate lending app must display its Certificate of Authority Number and its Corporate Registration Number on its platform and within the app's "About" section.
National Privacy Commission (NPC) Compliance: Legitimate apps must comply with the Data Privacy Act of 2012. If an app demands access to your entire contact list or social media accounts as a condition for a loan, it is a red flag for potential harassment.

Legal Remedies Against Illegal Lenders

If a company is found to be operating without a Certificate of Authority, or if a licensed company engages in predatory behavior:

SEC Corporate Governance and Finance Department (CGFD): Borrowers can file formal complaints for violations of the Lending Company Regulation Act or unfair debt collection practices.
National Privacy Commission (NPC): For cases involving "debt shaming" or unauthorized processing of personal data.
Cybercrime Courts: Under the Cybercrime Prevention Act of 2012, victims of online harassment and identity theft by lenders can seek criminal prosecution.

Note: Engaging with unlicensed lenders often results in high-interest "debt traps" and lack of regulatory protection. It is imperative to consult the SEC's verified database before entering into any credit agreement.