SEC Verification of Lending Company Legitimacy in the Philippines
A comprehensive legal guide for borrowers, investors, and compliance officers
1. Why verification matters
Unregistered or non-compliant lending entities (“loan sharks,” rogue OLAs, fly-by-night cooperatives, etc.) routinely impose usurious charges, misuse personal data, and employ abusive collection tactics. Republic Act (RA) 9474—or the Lending Company Regulation Act of 2007 (LCRA)—makes it illegal to engage in the business of granting loans without a Certificate of Authority (CA) from the Securities and Exchange Commission. Violators face:
| Offence | Statutory penalty (RA 9474, § 21–22) | Typical SEC action |
|---|---|---|
| Operating without CA | ₱ 10 000 – ₱ 1 000 000 and/or 6 mos – 10 yrs imprisonment | Cease-and-desist order (CDO), website/app takedown, referral to NBI / PNP |
| Failure to observe disclosure & reporting rules | Administrative fine up to ₱ 100 000 plus ₱ 200 per day of continuing violation | Suspension or revocation of CA |
| Harassing collection practices (RA 11765 § 4-5) | ₱ 50 000 – ₱ 2 000 000, restitution, directors/officers may be black-listed | Joint enforcement with NPC & BSP |
2. Governing statutes & regulations (key provisions)
| Instrument | Focus | Notable sections |
|---|---|---|
| RA 9474 (LCRA, 2007) | Core licensing + prudential rules | Secs. 4 (licensing), 5-7 (minimum paid-in capital: ₱ 1 M per branch), 17-18 (recordkeeping & reports), 21-22 (penalties) |
| SEC Memorandum Circular (MC) 19-2019 | Revised IRR of RA 9474 | Digital CA certificate, branch expansion rules, use of “Lending/Lend” in corporate name |
| SEC MC 10-2021 | Prohibition of false threats/unauthorized charges by online lending platforms (OLPs) | Mandatory disclosure template; call-record retention |
| RA 11765 (Financial Products and Services Consumer Protection Act, 2022) | Cross-sector consumer protection, empowers SEC to set conduct standards | § 4-5 (proscribed abusive collection, confidentiality of personal data) |
| BSP Circular 1133-2022 (for reference) | Caps on interest & charges for salary, payday & personal loans (not issued under the LCRA, but often overlaps) | Effective 03 Jan 2023 |
| RA 9510 / CISA (Credit Information System Act) | Mandatory sharing of borrower data with CIC | Non-submission is ground to suspend CA |
3. How the SEC authorizes a lending company
Incorporation:
- File Articles of Incorporation & By-laws under Title XVI of the Revised Corporation Code (RA 11232).
- Corporate name must contain “Lending Company,” “Lending Investor,” or “Lender.”
Capitalization:
- Minimum paid-in capital: ₱ 1 million per branch (RA 9474 § 5).
- Proof: bank certification & audited financial statements (AFS).
Certificate of Authority (CA):
- Secured after the SEC issues the primary Certificate of Incorporation.
- Valid for perpetuity but subject to annual fee & reportorial compliance.
Post-licensing obligations:
- Submission of General Information Sheet (GIS) within 30 days of annual stockholders’ meeting.
- AFS within 120 days of fiscal year-end.
- Quarterly reports on loan portfolio, effective interest, and collection practices (MC 19-2019 Annex C).
- Registration of each Online Lending Platform (OLP) under MC 19-2019 & MC 10-2021.
4. Verifying legitimacy: practical step-by-step
| Step | Where/how | What you should see |
|---|---|---|
| 1. Search SEC Registration System | SEC iView (public search) or Company Registration System (CRS) | Corporate name, Reg. No., date of incorporation |
| 2. Confirm CA | Request copy via SEC Express One-OIC (online) or e-mail sicd-records@sec.gov.ph | “Certificate of Authority to Operate as a Lending Company” bearing QR-code & dry seal |
| 3. Check SEC Advisories | Navigate to sec.gov.ph -› “Advisories” | Red-flag lists: unregistered lenders, revoked CAs, persons enjoined |
| 4. Validate physical presence | Visit declared principal office / branch; ask for CA displayed on premises (RA 9474 § 7) | Original CA & latest mayor’s permit |
| 5. Inspect disclosures | Examine loan contract & mobile app | True annual percentage rate (APR), all fees, cooling-off period, data-processing consent clause |
| 6. Verify with other regulators (if applicable) | • NPC for privacy seal • BSP if entity also offers e-money or payment services | Certificates & circular-compliant disclosures |
Red flags: No CA number in ads, company name mismatch, request for blank loan forms, interest shown “per month” without APR, harassment threats, or use of multiple dummy Facebook pages.
5. Enforcement landscape
- Task Force “OPLAN BOLILLO” (SEC + NPAB/PNP-CIDG): raids and app takedowns against illegal OLAs since 2019.
- Over 100 CDOs issued 2019-2024; publicized list updated bi-weekly.
- First criminal convictions under RA 9474 (2021, Pasig RTC; 2023, Makati RTC) sent principals to 6 years + ₱ 500 000 fine; appellate review pending.
- Joint SEC-NPC-BSP Guidelines on Fair Debt Collection (draft 2025): harmonizes harassment definitions, cross-enforcement.
6. Borrower & whistle-blower remedies
File a complaint with SEC Enforcement & Investor Protection Department (EIPD):
- Attach screenshots, loan contract, proof of payment, and harassment evidence.
- SEC may issue a 48-hour freeze order on collections while investigating.
Privacy violation? Lodge a parallel complaint with the National Privacy Commission under § 25-34 of the Data Privacy Act (RA 10173).
Criminal redress: Coordinate with NBI Anti-Fraud Division or PNP-CIDG for estafa, grave threats, or cyber-libel charges.
Civil action: Borrower may seek rescission or reformation of usurious contracts (interest > 6% per month is presumptively unconscionable under jurisprudence e.g. Spouses Abella v. CAC (G.R. 164652, Jan 20 2009)).
7. Interplay with financing companies & microfinance NGOs
| Entity type | Licensing law | Regulator(s) | Key distinctions |
|---|---|---|---|
| Lending Company | RA 9474 | SEC | Retail loans (any purpose) ≤ ₱ 500 000 typical, capital ≥ ₱ 1 M/branch |
| Financing Company | RA 5980 as amended by RA 8556 | SEC (prudential) + BSP (select products) | May extend medium-term credit, lease, & factoring; higher capital floor (₱ 10 M NCR, ₱ 2.5 M elsewhere) |
| Microfinance NGO | RA 10693 | SEC + Microfinance NGO Regulatory Council | Tax incentives; loans limited to micro-entrepreneurs; social performance standards |
The verification mechanics are similar (SEC registration & CA equivalent), but pay attention to the correct law listed on their secondary license.
8. Compliance checklist for lending companies (at a glance)
- ☐ Primary registration under RA 11232
- ☐ CA issued under RA 9474
- ☐ Paid-in capital ≥ ₱ 1 M per branch
- ☐ Latest GIS & AFS on file
- ☐ Registered OLPs & privacy manual submitted
- ☐ Board-approved Fair Collection Policy (per RA 11765)
- ☐ Registered with Credit Information Corporation
- ☐ Anti-Money Laundering Council & BIR registration (if thresholds met)
9. Practical tips for stakeholders
| For borrowers | For investors/directors | For compliance officers |
|---|---|---|
| • Always demand the CA number and verify it online. | • Confirm capital infusion is actually deposited (bank cert). | • Maintain documentary trail—SEC requests are time-bound (often 3 days). |
| • Compare APR to BSP circular caps; walk away if > 15-20% per month. | • Cross-check if any incorporator is black-listed in previous CDOs. | • Schedule quarterly self-assessments against MC 10-2021. |
| • Keep copies of all SMS, emails, and call logs. | • Ensure board approval of each OLP before launch. | • Enroll in SEC eFAST to file reports; avoid late fees. |
10. Conclusion
In the Philippine regulatory ecosystem, SEC verification is the borrower’s first—and often only—line of defense against predatory lenders. A valid Certificate of Authority, transparent pricing, proper data-privacy notices, and respectful collection practices are non-negotiable indicators of legitimacy. By mastering the statutes, knowing where to look, and acting promptly on red flags, consumers and investors can navigate the lending landscape with confidence—while compliant lenders strengthen market trust and avoid costly sanctions.