Verifying the Legality of a Lending Corporation with the Philippine Securities and Exchange Commission (SEC)
1. Why Verification Matters
Operating as a lending company in the Philippines without proper authority is illegal. Borrowers who deal with unlicensed entities lose the basic protections of Philippine law, while officers of unregistered lenders expose themselves to administrative, civil, and even criminal liability. Thorough verification—before you invest, borrow, or partner—safeguards everyone involved.
2. Governing Laws & Regulations
| Statute / Rule | Key Points for Lending Companies |
|---|---|
| Republic Act (RA) 9474 – Lending Company Regulation Act of 2007 (LCRA) | • Requires a Certificate of Authority (CA) from the SEC in addition to a regular certificate of incorporation. • Minimum paid-in capital: PHP 1 million (or higher for foreign-owned firms under the FIA/NEG List). • Limits business purpose to “lending” and activities incidental thereto. |
| RA 8556 – Financing Company Act | Distinct from RA 9474; some firms mislabel themselves. Lending companies cannot engage in financing-company activities unless separately authorized. |
| Revised Corporation Code (RA 11232, 2019) | Sets general corporate registration requirements and grounds for SEC administrative sanctions or revocation. |
| BSP-SEC Joint Memoranda | Require coordination when lending activities overlap with quasi-banking or e-money. |
| SEC Memorandum Circular (MC) 18-2019, MC 28-2020, MC 10-2021, MC 3-2022 | Impose ceilings on interest and penalties, prohibit abusive debt collection, mandate registration of online-lending platforms (OLPs) and disclosure of digital footprints. |
| Data Privacy Act (RA 10173) & NPC Circulars | Regulate how lenders access borrowers’ phone contacts, location, and personal data. |
| Revised Penal Code & RA 11765 (Financial Consumer Protection Act) | Provide criminal penalties for fraud, unfair collection, harassment, or misleading advertising. |
3. Minimum Legal Requirements for Lending Corporations
Articles of Incorporation & By-laws – Must state the primary purpose as “lending” (or “micro-lending”) and list the Filipino ownership percentage.
SEC Certificate of Incorporation (CI) – Confirms corporate existence.
SEC Certificate of Authority (CA) to Operate as a Lending Company – Separate, numbered document under RA 9474.
Minimum Paid-in Capital – PHP 1 million deposited into the corporate bank account and reflected in audited financial statements.
Compliance Officer & Business Address – SEC requires full contact details and notice of changes within 30 days.
Annual Requirements –
- General Information Sheet (GIS) within 30 days after the annual stockholders’ meeting
- Audited Financial Statements (AFS) within 120/160 days after fiscal year-end (depending on listed/non-listed status)
- Proof of compliance with MC 28-2020 (valid email, website, social-media URLs)
Online Lending Platforms (if any) – Each OLP must be separately registered and listed on SEC’s public roster.
4. How to Verify a Lending Company
| Step | What to Check | How |
|---|---|---|
| 1. Confirm Corporate Existence | SEC Certificate of Incorporation | • Use the free SEC Company Registration System (CRS) search, or request a plain/ certified copy from the SEC Main Office or satellite extension offices. |
| 2. Verify the Certificate of Authority (CA) | Series number & validity | • Look for the CA number printed on walls, websites, and contracts. • Cross-check against SEC’s “List of Licensed Lending Companies” (periodically uploaded as PDF on sec.gov.ph). |
| 3. Check for Suspension, Revocation, or Pending Cases | SEC Orders & Advisories | • Browse the SEC Public Advisories page. • Search for En Banc or MSRD orders revoking CAs or imposing fines. |
| 4. Confirm Online-Lending Platform Registration | Name of App / URL | • SEC posts an up-to-date list of registered OLPs versus those ordered taken down. • Verify on the Google Play / Apple App Store developer contact section—the legal entity behind the app must match the CA holder. |
| 5. Review Interest & Charges | RA 9474, MC 18-2019 | • Interest (including service fees) ≤ 6% per month for unsecured loans < PHP 10,000. • Penalties, interest-on-interest, collection fees, or “processing fees” above the caps are unlawful. |
| 6. Examine Collection Practices | MC 18-2019, RA 11765 | • Collection must be through lawful means, no threats, obscene language, publishing debts, or contacting people other than the borrower except once for location. |
| 7. Audit Data-Privacy Compliance | DPA, NPC Advisory Opinions | • The lender must obtain specific, informed, freely given consent before accessing contacts or photos. • Borrower may revoke consent anytime and file a complaint with the National Privacy Commission. |
5. Common Red Flags
- The company refuses to show its SEC CA or says “application pending.”
- CA number on the certificate does not appear in the SEC roster or is under a different name.
- The lender’s app or website displays no corporate name, SEC registration number, or business address.
- Promises of “guaranteed approval” with processing fees collected before loan release.
- Interest or penalties above SEC’s regulatory caps.
- Harassment: daily calls to employer/family, threats of criminal cases for civil debt, public shaming.
- “Franchises” for lending offered to individuals—only corporations may engage in lending under RA 9474.
6. Penalties for Unregistered or Non-Compliant Lending Companies
| Violation | Possible Sanctions |
|---|---|
| Operating without a CA | • Stop-and-desist order • Administrative fines up to PHP 1 million plus PHP 2,000/day of continuing violation • Criminal liability: PHP 10,000 – PHP 50,000 fine and/or imprisonment of 6 months – 10 years |
| Violating interest & collection caps | • Suspension or revocation of CA • Fines up to PHP 1 million • Liability under the Financial Consumer Protection Act |
| Misuse of personal data | • NPC fines of up to PHP 5 million per infraction • Criminal prosecution under RA 10173 |
| False representations / investment solicitations | • Prosecution for securities fraud (Sec. 26, SRC) • Possible estafa under Art. 315, RPC |
7. Recourse for Borrowers and Financial Consumers
File a Complaint with the SEC – Enforcement and Investor Protection Department (EIPD)
- Provide screenshots, contracts, emails, call recordings.
- SEC may issue Show-Cause, Cease-and-Desist, or asset-freeze orders.
National Privacy Commission Complaint for unauthorized contact scraping, doxxing, or harassment.
Civil Action for Damages under Art. 19/20/21, Civil Code (abuse of rights, quasi-delict).
Criminal Charges for estafa, grave threats, unjust vexation, or violations of the LCRA.
Barangay Mediation or Small-Claims Court (for loans ≤ PHP 1 million, no lawyers required) to contest illegal fees.
8. Best Practices Before Borrowing or Investing
| Do | Don’t |
|---|---|
| • Screenshot and save the lender’s CA and corporate details. | • Pay “processing fees” before the loan hits your bank or e-wallet. |
| • Read the disclosure statement (RA 3765) showing total cost of credit. | • Allow the app to access all contacts; limit permissions to “while using the app.” |
| • Check SEC advisories monthly; they are often updated. | • Assume that a lender is legitimate because it is in the App Store/Play Store. |
| • Ask for official receipts for every payment. | • Be pressured by threats of libel or arrest for non-payment of a civil debt. |
9. Practical Verification Checklist (Printable)
- □ SEC Certificate of Incorporation matches company name.
- □ SEC Certificate of Authority number and date.
- □ Company appears on latest SEC List of Lending Companies with CA.
- □ If online, the platform/app is on SEC’s Registered OLPs list.
- □ Interest ≤ 6 % per month; penalties not compounded.
- □ Privacy consent form is specific and revocable.
- □ No upfront fees before disbursement.
- □ Collection policies avoid harassment or public disclosure.
10. Conclusion
Verifying a lending corporation in the Philippines is more than a box-ticking exercise—it is essential consumer protection. The SEC provides straightforward tools (CA roster, advisories, complaint portals) to help the public distinguish lawful lenders from opportunistic operators. By cross-checking a company’s corporate registration, Certificate of Authority, online-platform accreditation, and compliance with rate caps and privacy rules, you can transact confidently and hold violators accountable.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. For advice on specific situations, consult a Philippine lawyer or contact the SEC directly.