SEC Accreditation of Lending Companies in the Philippines

A comprehensive legal primer (updated to May 2025)

1. Statutory & Regulatory Framework

Authority	Key Issuances	Core Subject-Matter
Congress	Republic Act No. 9474 (Lending Company Regulation Act of 2007, “LCRA”)	Primary substantive law governing lending companies
	R.A. 8799 (Securities Regulation Code)	Empowers the Securities and Exchange Commission (SEC) to license corporate entities engaging in credit activities
SEC	Implementing Rules & Regulations of the LCRA (IRR, 2008)	Flesh out procedures, capitalization, foreign-ownership limits, sanctions
	Memorandum Circular (MC) No. 19-2019	Registration & regulation of Online Lending Platforms (OLPs)
	MC No. 28-2020	Disclosure of beneficial ownership
	MC No. 10-2021	Simplified submission of financial statements; shift to electronic filings
Bangko Sentral ng Pilipinas (BSP)	Circular No. 1133 - 2021	Caps on interest, fees & penalties for consumer and payday loans (applies to SEC-licensed lenders)
Anti-Money Laundering Council	2021 AML/CTF Guidelines for Designated Non-Financial Businesses & Professions	Lending companies classified as “covered persons”

Bottom line: Although the LCRA is the backbone statute, a lending company must integrate SEC corporate rules, BSP consumer-credit caps, AMLA requirements, Data Privacy Act mandates, and various special circulars into its compliance matrix.

2. What Qualifies as a “Lending Company”?

Under §3 LCRA a lending company is a stock corporation (i.e., formed under the Corporation Code) that grants loans from its own capital funds or from funds sourced through loans or private placements, without issuing deposit-substitutes or quasi-banking instruments. Compare:

Financing companies (R.A. 8556) may engage in leasing & equity investments;
Microfinance NGOs (R.A. 10693) are non-stock, non-profit;
Banks/NBQs fall under BSP supervision.

3. Accreditation in Four Phases

Phase	Actor	Key Documents	SEC Output	Typical Lead Time*
Pre-Incorporation	Promoters	Name Reservation, Proposed Articles & By-laws, Proof of Minimum Paid-In Capital	Name Verification Slip	1–2 days
Corporate Registration	Incorporators (≥5, majority Filipinos)	Final Articles, By-laws, Treasurer’s Affidavit, Bank Certificate of Deposit, Directors’ NBI & Police Clearances	Certificate of Incorporation	3–10 working days
Licensing	Newly-formed corporation	SEC Form LC-A-001 (Application for Certificate of Authority), Information Sheet, Business Plan, AMLA Manual, Data Privacy Compliance Sheet	Certificate of Authority (CA) to Operate as Lending Company	15–30 days
Post-CA Compliance	Licensed company	GIS (annually), Audited FS, Beneficial Ownership Declaration, OLP Registration (if online), AML/CFT & Consumer Protection Reports	Good standing	Continuous

*Indicative; regional SEC offices may vary.

3.1. Capitalization & Ownership

Minimum paid-in capital: ₱1 million (higher for OLPs: SEC often requires ₱2–5 million to reflect tech expenses).
Foreign equity ceiling: 40 % (cf. “mass media” negative list rationale in Public Finance) until Feb 2024. R.A. 11647 and the amended Foreign Investments Act removed the specific cap for lending companies, but the SEC continues to insist that majority Filipino ownership remains unless a separate approval is secured.
Directors & Officers: Majority of the Board must be residents of the Philippines; at least one director must have three (3) years’ experience in finance, banking, or law.

3.2. Online Lending Platforms

Since 2019 a separate OLP Registration Certificate is mandatory per mobile app/website. Highlights:

Prior disclosure of data-collection practices, third-party service providers, and permitted contact channels.
Mandatory “index of OLPs” on the SEC website; apps unlisted therein are deemed illegal.
In-app privacy notice & borrower consent mechanism must be screenshot-submitted to the SEC before launch.

4. Operational Requirements After Accreditation

Interest, Fees & Penalties
- BSP Circular 1133 imposes a nominal interest cap of 6 % per month (≈ 0.2 % per day) and effective interest rate (EIR) cap of 15 % per month for loans up to ₱10,000 and tenure under 4 months.
- Non-interest charges (processing, service, notarial, collection) may not exceed 5 % of principal.
- Late-payment penalty ceiling: 5 % of unpaid amount per month.
Consumer Protection
- Written Disclosure Statement (DSOL) showing APR, amortization schedule, all fees.
- No “doxxing,” shaming, or third-party disclosure tactics—Data Privacy Act & SEC MC 18-2019 expressly prohibit unconsented contact of debtors’ phonebook.
- Complaints mechanism: a dedicated email/landline; 7-day response window.
AML/CFT & KYC
- Covered transaction threshold: aggregate cash transactions ≥ ₱500,000 within one (1) day.
- Suspicious Transaction Reports (STR) regardless of amount if “unusual,” per AMLC 2021 Guidelines.
- Independent Compliance Officer (CO); AML Manual submitted to SEC/AMLC.
Reportorial Filings
- GIS within 30 days from annual stockholders’ meeting.
- AFS audited by an accredited external auditor, filed on or before April 15 (for calendar-year entities) via SEC-EDGAR.
- Beneficial Ownership Disclosure Form within 30 days of any change.
- OLP Annual Certification: list of active platforms, download links, server locations.
Branch Establishment
- File SEC “Form LC-B-001” + local government permits; no separate capital requirement but books per branch must be kept.

5. Common Grounds for Denial, Suspension, or Revocation

Basis	Statutory/Regulatory Anchor	Usual Consequence
False statements in CA application	§5 LCRA	Denial or revocation of CA; ₱10k–₱50k fine
Lending without CA	§12 LCRA (Criminal)	Imprisonment 6 mos–10 yrs or fine ₱10k–₱50k or both
Engaging in unfair collection (harassment, threats)	SEC MC 18-2019; DPA 2012	Suspension of CA; fines up to ₱1 million per count
Exceeding interest caps	BSP Circular 1133; Art. 1956 Civil Code	Void stipulation; administrative fines; restitution
Failure to file AFS/GIS for 5 consecutive years	Revised Corporation Code §21	Delisting & revocation of Certificate of Incorporation
Money-laundering breaches	AMLA §14	Penalties up to ₱5 million per violation; revocation of CA

6. Interaction with Other Legal Regimes

Usury Law (Act 2655) & CB Circular 905 (1982) suspended interest ceilings but BSP circulars now re-impose caps for low-value consumer loans.
Civil Code remedies still apply—void interest > 12 % p.a. before July 2013; legal interest 6 % p.a. thereafter (Bangko Sentral Monetary Board rates).
Small Business Corporation (SB Corp.) loans under “P3 Program” are public-sector and not governed by LCRA.
Barangay Micro Business Enterprises (R.A. 9178) may borrow but not act as lenders; thus accreditation still required if they engage in lending.
Fintech Regulatory Sandbox (BSP-SEC-DICT Joint Memorandum 2020): innovative credit scoring may be tested but company must already hold an SEC CA.

7. Jurisprudence Snapshot

SEC v. Inter-Asia Services Corporation (G.R. No. 135808, Feb 2004) — affirmed SEC’s jurisdiction to penalize unlicensed lending activities.
Philippine Global Communications v. Relova (G.R. No. 47048, Aug 1991) — reiterated that engaging in a regulated business sans license is mala prohibita.
People v. Tanada (CA-G.R. CR-H.C. 12038, 2022) — first appellate conviction under §12 LCRA for operating a Facebook-based “5-6” scheme.

8. Practical Accreditation Checklist (2025 Edition)

Pre-allocate ₱2 million capital if you intend any online platform.
Reserve a distinct corporate name ending in “Lending Company, Inc.” (SEC Memo 1-2022 bans “Finance,” “Bank,” “Microcredit” if not licensed).
Open a corporate bank account and deposit at least 25 % of subscribed capital (≤ ₱1 million or the entire minimum, whichever is higher).
Prepare AML Manual & Data Privacy Manual early—both must be attached to the CA application.
All directors/officers must obtain NBI Clearance dated not earlier than 30 days pre-filing.
Draft Loan Agreement templates with full DSOL and interest computations. These must be pre-cleared for OLPs.
Invest in a two-factor authentication system for all debtor log-ins; SEC TechUnit now audits cyber-security readiness.
Pay the SEC filing fees: · Incorporation—0.2 % of authorized capital stock (ACS) + ₱1,010 legal research; · CA—₱10,000 + ₱20 per ₱1,000 of paid-in capital in excess of ₱500k.
After receiving the CA, record your stock & transfer book, and corporate minutes book—SEC examiners routinely check physical books on inspection.

9. Timeline of Key Regulatory Developments (2007-2025)

2007 – R.A. 9474 enacted; supersedes Old Usury Law reference for lending entities.
2008 – SEC issues IRR; first batch of 400+ CAs released.
2013 – BSP cuts legal interest rate to 6 % (Nacar v. Gallery Frames).
2016 – Data Privacy Act fully effective; SEC starts cross-enforcement with NPC.
2019 – Surge of mobile apps; SEC MC 19-2019 creates OLP registry; 30+ apps ordered shut.
2021 – BSP Circular 1133 imposes interest/fee caps; SEC MC 10-2021 digitizes filings.
2023 – Revised Corporation Code Rule 3 shortens revival process, aiding dormant lenders.
2024 – Foreign Investments Act amendments remove express lending-sector equity cap (implementation guidelines pending).
2025 – SEC begins AI-based market-conduct surveillance of OLP data scraping practices.

10. Penalties at a Glance

Administrative: ₱10,000 – ₱1,000,000 per violation, plus ₱2,000 per day of continuing offense. Criminal: Imprisonment of up to 10 years under §12 LCRA. Civil: Courts routinely award moral & exemplary damages for privacy breaches; case law ranges ₱50,000 – ₱300,000 per borrower. Corporate: Revocation of CA & dissolution; directors/officers personally liable under §161 Revised Corporation Code.

11. Frequently-Asked Questions

Do we need BSP approval too? No. Lending companies fall exclusively under SEC, unless you wish to accept deposits or quasi-banking funds, in which case you must convert into a bank.
Can we advertise on social media? Yes, but the ad copy must show the CA number, OLP number, interest rate range, and full corporate name. Misleading “0 % interest” teasers invite fines.
Is renewal of the CA required? No. A Certificate of Authority has an indefinite term, but it can be suspended/revoked and is conditioned on continuous compliance.
Can we outsource collections? Only to SEC-registered collection agencies. You remain liable for their violations.
How soon can dividends be declared? After complying with the minimum unimpaired retained earnings test under §42 of the Revised Corporation Code and maintaining capital adequacy for outstanding loans.

12. Compliance Calendar (Sample for Calendar-Year Entity)

Date	Compliance Item	Statutory Basis
Jan 31	Renewal of Business Permit (LGU)	Local ordinances
Apr 15	File Audited FS & TAX Return (BIR)	Sec. 75 NIRC; SEC MC 10-2021
Within 30 days of ASM	GIS filing	RCC §177
Jul 15	AMLA Compliance Report	AMLC Memo 5-2021
Aug 31	Beneficial Ownership Update (if changes)	SEC MC 28-2020
Oct 15	OLP Annual Certification	SEC MC 19-2019
Year-round	STRs within 5 BDs of red-flag event	AMLA §9(b)

13. Conclusion

Obtaining and maintaining SEC accreditation is less a one-off filing exercise than a continual governance commitment. With recent emphasis on online platforms, data privacy, and consumer-centric interest caps, the regulatory landscape has shifted from mere registration policing to market-conduct supervision. A compliant lending company in 2025 must therefore integrate corporate, financial, and technological controls—or risk swift enforcement, reputational damage, and personal director liability.

(This article is for informational purposes only and is not legal advice. For specific situations, consult Philippine counsel or the SEC Corporate & Partnership Registration Division.)