Verification of Legitimacy for Philippine Lending Corporations A doctrinal-and-practical guide for lawyers, compliance officers, investors, and borrowers

1 | Why legitimacy matters

Unregistered or non-compliant lenders expose borrowers to abusive collection, privacy breaches, and ruinous costs, while directors and investors face criminal liability and forfeiture. The Securities and Exchange Commission (SEC) therefore treats verification of a lending company’s status as the first line of consumer and investor protection.

2 | Core legal framework

Statute / Issuance	Key points on legitimacy
Republic Act No. 9474, “Lending Company Regulation Act of 2007” & Implementing Rules	• Only a stock corporation may engage in the “business of granting loans from its own capital funds”. • ₱1 million minimum paid-up capital (higher in Metropolitan Manila via SEC Guidelines). • Prior Certificate of Authority (CA) from the SEC Corporate Governance and Finance Department (CGFD).
Republic Act No. 8556 (Financing Company Act)	Higher bar—₱10 million capital—but many verification steps mirror those for lending companies.
Revised Corporation Code of 2019	Allows One-Person Corporations (OPCs); since 2021 an OPC may obtain a CA provided it meets RA 9474 capitalization and governance safeguards.
BSP Circular 1133 s. 2021 & Memorandum M-2021-065	Imposes an interest-rate ceiling of 6 % per month (add-on) and 5 % late-payment cap for loans ≤ ₱10 000 and tenor ≤ 4 months. A quick way to spot an illegitimate lender is an advertised rate that exceeds this ceiling.
Truth in Lending Act (RA 3765) & BSP Circular 1039 s. 2019	Compels transparent disclosure of Annual Percentage Rate (APR), charges, and collection fees.
Anti-Money Laundering Act & 2021 AMLC/SEC Rules	Lending companies are “covered persons.” They must register with AMLC, adopt customer acceptance and suspicious-transaction reporting, and appoint a Compliance Officer.
Data Privacy Act (RA 10173) and NPC Circular 2022-01	Access to borrowers’ phone contacts, photos, and location is lawful only with freely given, informed, and purpose-specific consent. SEC/NPC enforcement advisories often cite this test.
SEC Memorandum Circulars 18-2019, 19-2019, 10-2021, 19-2022, 7-2024	Establish the Online Lending Platform (OLP) regime: separate registration of each website/app, disclosure of exact data-flows, a limit of two specific natural-person “authorized data handlers,” and a ban on “contact-list harvesting” and public-shaming tactics.

3 | Definition and permissible scope

A lending company “grants loans from its own paid-up capital or borrowed funds, without taking deposits” (RA 9474, §2). It is distinct from:

Banks / quasi-banks – supervised by Bangko Sentral ng Pilipinas (BSP) and allowed to accept deposits.
Financing companies – typically larger, may engage in leasing and consumer-finance packages.
Pawnshops & microfinance NGOs – separate charters and verification paths.

Any entity that advertises “loans” but (a) lacks a CA, (b) operates as a sole proprietorship, or (c) takes the public’s money for relending, is prima facie illegal.

4 | Incorporation & licensing checklist

Name reservation—must contain the word “Lending.”
Articles of Incorporation
- Primary purpose narrowly worded: “To operate as a lending company pursuant to RA 9474.”
- At least 25 % subscribed and 25 % paid-in; overall paid-up ≥ ₱1 million.
- Filipino board majority (except when availing of full foreign ownership under the 2022 SEC liberalization, still subject to Negative List items).
By-laws reflecting audit, risk, and AML committees.
Pre-licensing documentary set to SEC-CGFD: bank certificate of deposit, GIS draft, AML framework, sworn list of beneficial owners (SEC MC 1-2021).
Certificate of Authority issued; without it, even a duly incorporated entity cannot lend.
Secondary permits: Mayor’s/Business Permit, BIR registration, mandatory enrolment with Credit Information Corporation (CIC).

5 | Ongoing compliance signals

Obligation	Frequency	Where verified
General Information Sheet (GIS)	30 days after annual stockholders’ meeting	SEC’s public “eFAST” portal
Audited Financial Statements	120 days after fiscal year-end	SEC-eFAST
CA renewal	Every 3 years (under 2024 rules)	CA serial number + expiry date appears on SEC database
AMLC Registration & CTR/STR filing	Continuous	AMLC portal (non-public; borrower must rely on lender’s disclosure)
CIC Data Submission	Monthly	CIC may suspend errant lenders; suspension list is public
OLP Registration (if any)	Prior to launch & annually thereafter	SEC “List of Registered OLPs” webpage
Consumer complaints docket	Ad hoc	SEC Enforcement and Investor Protection Department (EIPD) posts advisories/cease-and-desist orders (CDOs)

6 | How to verify legitimacy in practice

Ask for two certificates from the lender:
- SEC Certificate of Incorporation (proof of corporate existence).
- SEC Certificate of Authority (proof of licence to lend). The CA shows a QR code and expiry date under post-2023 security features.
Cross-check the serial numbers using:
- SEC i-Register database at the SEC Main Office lobby kiosks or via the “SEC Express” website.
- Email request to cgfd@sec.gov.ph or hotline (+632) 8818-0921.
Review SEC Advisories/CDOs: a single search for the corporate name in the “Advisories” tab flags entities ordered to stop operations.
Check the interest-rate ceiling: any posted rate > 6 % per month (or a service-fee structure that mathematically breaches the cap) is a red flag.
Look for OLP registration for apps or websites: app-store page must disclose (a) SEC Registration No., (b) CA No., and (c) email of its Data-Protection Officer.
Inspect the loan contract for the mandatory Truth-in-Lending “Disclosure Statement”—a one-page summary of principal, APR, fees, amortization schedule, and total cost. Absence of this page is illegal per BSP Circular 1039.
Search the Credit Information Corporation “Accessing Entities” list: only compliant lenders appear.
Verify business-permit QR code with the relevant LGU’s e-BOSS (if available).
Observe collection practices: threats of public shaming, social-media tagging, or disclosure of debt to third parties violate:
- SEC MC 18-2019 (harassment ban)
- Article 287 of the Revised Penal Code (grave coercion)
- NPC advisory opinions (privacy breach).
Check court dockets: a pattern of cases for “Violation of RA 9474” or estafa signals illegitimacy. Regional Trial Courts (Special Commercial Courts) decisions are searchable on e-Court kiosks.

7 | Special rules for Online Lending Platforms (OLPs)

The platform itself must be registered in addition to the lending company.
Every update of the app (e.g., new version or new data-points requested from borrower’s phone) requires prior SEC approval.
Data handlers—only two named individuals may access borrower personal data; changing them requires a sworn notice to SEC and NPC.
Screen scraping/contact list mining is categorically prohibited. Violations lead to summary revocation of the CA and blacklisting of the directors and shareholders for five years.

8 | Penalties and enforcement

Violation	Statutory / Administrative penalty
Operating without CA	RA 9474 §12: ₱10 000 – ₱50 000 per transaction + ≤ 6 months’ imprisonment; SEC may also order disgorgement and permanent disqualification.
Excessive interest for small loans	BSP administrative fine up to ₱1 million per violation + restitution.
Failure to file GIS / AFS	SEC fines ranging from ₱1 000 to ₱50 000 per report + daily penalty and possible revocation of CA.
AMLA non-registration / reporting	AMLC penalty up to ₱500 000 per CTR/STR lapse + criminal prosecution.
Data-privacy breach	NPC fine up to ₱5 million per act + imprisonment for responsible officers.
Harassment / public shaming	CDO + SEC/NPC joint penalty; criminal charges for grave coercion, unjust vexation, libel.

9 | Jurisprudence touchpoints

People v. Rosauro, G.R. 206345 (15 June 2016) – conviction affirmed for unlicensed “5-6” lender; court held that “loan agreements” are void when the lender lacks a CA.
Spouses Abaygar v. E.B. Lending Corp., G.R. 217947 (27 Jan 2021) – CA revocation made lender a de facto corporation; contracts after revocation were declared unenforceable.
BSP v. Brownbark Corp., CTA EB No. 2350 (27 Mar 2024) – first case applying the 6 % monthly cap; administrative fine upheld despite lender’s argument that cap “discourages micro-credit.”

10 | Red-flag checklist for borrowers & investors

☐ No SEC CA or expired CA ☐ Ads quote “0 % interest” but small print shows large “processing fee” deducted upfront ☐ Required to “advance” a deposit before loan release ☐ Mobile-app permissions include contacts, media files, or location without clear purpose ☐ Collector threatens social-media exposure or police arrest ☐ Company promises “guaranteed 20 % monthly returns” to would-be investors (indicative of Ponzi layering)

Any two red flags warrant an immediate written complaint to epd@sec.gov.ph (EIPD) or to the National Privacy Commission via complaints@privacy.gov.ph.

11 | Upcoming regulatory developments (watchlist)

SEC Draft Circular on “Crowdlending” – will merge peer-to-peer (P2P) platforms with RA 9474 rules and impose escrow requirements.
BSP-SEC joint task force on “buy-now-pay-later” (BNPL) – expected to expand interest-rate ceilings to installment credit.
Open Finance Framework – lending companies designated as “eligible third-party providers”; those who opt-in will undergo BSP sandbox testing, adding another layer for legitimacy checks.

12 | Conclusion

Verifying a Philippine lending corporation is multi-tiered: confirm corporate existence, confirm the right to lend, and confirm continued regulatory fitness. Because every layer—corporate, licensing, AML, privacy, consumer protection—carries its own public touch-point (SEC portals, BSP circulars, NPC advisories, AMLC registration, GIS/AFS filings), a modest desktop review can expose most illegal operators in minutes. For lawyers drafting loan or investment documents, attaching the SEC CA and the Truth-in-Lending Disclosure Statement as annexes is now considered market best practice.

Bottom line: No Certificate of Authority, no loan. When in doubt, call the SEC first and borrow later.