Basics of the Lending Company Regulation Act of 2007 (RA 9474)

On 22 May 2007, Republic Act No. 9474, also known as the “Lending Company Regulation Act of 2007,” was approved. The law is consistent with the delcared policy of the State to regulate the establishment of lending companies and to place their operation on a sound, efficient and stable condition to derive the optimum advantages from them as an additional source of credit; to prevent and mitigate, as far as practicable, practices prejudicial to public interest; and to lay down the minimum requirements and standards under which they may be established and do business. Here’s a basic discussion of the new law:

What is a Lending Company?

It refers to a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons. It shall not be deemed to include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law. The term shall be synonymous with lending investors.

What is the form of organization for a lending company?

A lending company shall be established ONLY as a corporation. Existing lending investors organized as single proprietorships or partnerships shall be disallowed from engaging in the business of granting loans to the public one year after the date of effectivity of the law. No lending company shall conduct business unless granted an authority to operate by the SEC.

What is the capital required for lending companies?

The minimum paid in capital of any lending company established under the law is One Million Pesos (P1,000,000.00). Existing lending companies established and in operation prior to the effectivity of this law shall comply with the required minimum capitalization within such time as may be prescribed by the SEC which time shall, in no case, be less than three years from the date of effectivity. The SEC may also prescribe a higher minimum capitalization if warranted by circumstances.

What is the citizenship requirement?

Upon the effectivity of the law, at least a majority of the voting capital stock shall be owned by citizens of the Philippines. The percentage of foreign-owned voting stock in any lending company existing prior to the effectivity of the law, if such percentage is in excess of forty-nine percent (49%) of the voting stock, shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond forty-nine percent (49%) of the voting stock of the lending company. The percentage of foreign-owned voting stocks in any lending company shall be determined by the citizenship of the individual stockholders. In the case of corporations owning shares in a lending company, the citizenship of the individual owners of voting stock in such corporations shall be the basis in the computation of the percentage. No foreign national may be allowed to own stock unless the country of which he is a national accords reciprocal rights to Filipinos.

What are the prescribed amount and charges on loans?

A lending company may grant loans in such amounts and reasonable interest rates and charges as may be agreed upon between the lending company and the debtor. However, the agreement shall be in compliance with the provisions of Republic Act No. 3765, otherwise known as the “Truth in Lending Act” and Republic Act 7394, otherwise known as the “Consumer Act of the Philippines”. The Monetary Board of the Bangko Sentral ng Pilipinas, in consultation with the SEC and the industry, may prescribe such interest rate as may be warranted by prevailing economic and social conditions.

*Originally posted at the Pinoy Entrepreneurs blog.

23 thoughts on “Basics of the Lending Company Regulation Act of 2007 (RA 9474)

  1. VICTOR

    I would liketo know if the debtor dies and he or she has a credit balance on his or her creditor who will shoulder the unpaid loan?

    Reply
    1. jhey

      Hi victor. If deceased has an estate left then administrator of the estate will pay the unpaid loan from the accumulated estate of the deceased. However if none, we are to look into the agreed contract if there exist a guarantor or mortgagor. They will be secondarily liable to the obligation. Hope to enlighten you this.

      Reply
    2. rabs

      that is where insurance will come it like credit life insurance (CLI) so that if the borrower dies the balance or the gross loan (level coverage) will be paid by the insurance, in return the borrower shall pay the insurance premium deducted to the loan proceeds and the coverage is co terminus to the loan term.

      Reply
  2. Long

    Victor,

    Suggest you tie up with a non-life insurance company so that all your borrowers are covered by Mortgage Redemption Insurance – that way, in case of death of the borrower, the insurance company pays for the outstanding loan balance and you need not burden the borrower’s family with the unpaid debt (they’ll already have a lot of burial expenses to contend with).

    Reply
      1. Yong

        Your comment is awaiting moderation.
        Sir..pls help me. I borrowed 80000 pesos with a 4.5percent sumthing interest for one year.. But i have to pay it in nt.. So my monthly is 6955nt for 12 months… If i compute it 83460nt… So that is around 136000pesos.. It was late when they orient me about d payment..my check is ready to release and i needed it badly for my placement fee and payment for my debt from friends..which i used it when i was applying.. Now mam i want to pay the full amount of 83460pesos supposedly… Because my mother lend me money from her pension..wud it b possible mam

        Reply
  3. K

    Hi Sir,

    Good day!

    I would like to inquire about my scenario. I had pawned my ATM to a lending company last year. I had several months missed as i lost my job back then. I had now resumed payment and my original loan which is 25k now ballooned to 60k. I have paid a total of 40k already but due to the interest and signed contract i was forced to pay a total of 100k by the end of this year. My question is i think i had paid enough and i wanted to stop is there a case that can be filed against me?

    Your assistance and advice will be highly appreciated.

    Reply
  4. Arthur

    My question. I pawned my atm. I am already done with the payment including interest but they have not return my atm yet. Already past 2 weeks. Do I have the right to demand to return interest paid at least the last month since atm has not been return yet? Hope for a quick response. Thank you.

    Reply
    1. jhey

      You may refer this to legal counsel. Does your contract include such clause of nonpayment.they must have offered you debt restructuring to avoid this problem. Interest rate of your loan is too high you can recoup it through unjust reasons. Please refer to bsp circular regarding legal intetest.

      Reply
  5. Emi

    Hi! I have a loan last 2011 worth 180000 less interest and advance pymnt for the lending company and less the processing fee for the agency and flight ticket,wherein I will use it for pocket money in Singapore.I signed checks w/the lending company. Howevr I came back home immediately because I got culure shocked there in SG regarding the type of job that is not stated in the contract. So when i came back home i wasnt able to pay my loan because i dont hve enough money.I was able to talk to one of the reps from the lending company to settle the amount that I can afford to pay until all of a sudden no communication at all. Then one day I received a call from the rep of the lending company saying that the company has changed it’s name but same employees and same acct number because the previous lending company herein signed the contrract with has closed and thy said it just changed the name But of course how would i believe if it’s true and it’s only a phon call.That was last yr of maybe around month of February.But hey didn’t send any notice that they changed the name and owner.And ten this year of July someone from the collections dept called me and telling me to settl my loan which ballooned to 700000!I They wanted me to pay it within 5days! Or settle atleast 60k in the meantime to hold my acct they said. I tried to request for more time aleast up to end of this August because its also a large amount. The money that I loaned half of the net amount around 35-40k was borowed by my friend wherein we signed an agrrement that she will pay it but of course she did not. My qquesion is do you think I can get imprisoned if I will not b able to pay thee 60k or 700000? And is it ok for them to collect money from me without them sending me any written notice that the company has changed and that I already have that ballooned interest? Also i did not sign any contract with the new named company. My contract is with the old company so i dont know if how much is the intereest of my loan because I ws not noified. What should I do? Please advise me.

    Reply
  6. lilibeth

    Hi Sir,

    Is it possible to start a small time lending business with only Php300,000.00 as capital and how to make it legal?

    Reply
  7. kinz

    Hi. What can I file to the employees of a lending company that brags to everyone that a person hasn’t paid the debt yet?

    Reply
  8. Arlene

    Hi..I am an OFW and i borrowed 50k pesos from a lending company there in the Philippines.The loan is payable within 6 months amounting to 15,833 per month.So all in all I have to pay a total amount of 95k to the lending company.Isnt it illegal for lending companies to give such high interests on loans?

    Reply
  9. MARC

    Hello Atty,

    Just wondering if the Peer-to-Peer (or Person-to-Person) lending service is allowed in the Philippines Lending Industry and will not violate the “Lending Company Regulation Act of 2007”. If not allowed yet do you think we can find some loop holes to offer this kind of service for the Filipino’s? Thank you much.

    Reply
  10. Jennever

    Good day!
    How much percentage should the owner give to a debtor for 1month?and if he abuses his license is thier any action to the owner?thank u

    Reply
  11. Kring Kiriring

    Hi sir,
    Hihinge po sna ako ng advice Kong pano ko po mairereklamo ang isang lending company, kasi po inalok po ako nila ng promo nila, na pag binayaran ko daw po lahat ng balance ko ay isasama nila ako sa slot ng promo nila which is I need to pay my balance worth 22,350..dhil pay binayaran ko daw po mkaka loan kmi ng 50k-100k daw po, so binayaran ko nga po.. Nong april 25,2017 that day dw na bbayaran ko is mkkukuha ko din daw agar yong niloan ko na 70k.. Kc sa 70k po ako naapproved eh.. 1week na po ngaun WLA prin pong balita at hnd po nila ako cnasagot sa mga tawag at txt ko.. ANO po ang pwede kong gawing legal action sa knila sir, lalo na nagfullypaid ako wla pa ako sa due date ko.. Ty po. Godbless

    Reply
  12. Leslie

    Just to clarify kung magkanu na po ngayon ang authorized capitalization ng lending companies. Salamat po God bless.

    Reply
  13. rose

    Hi..good day po mgask lang po SNA aq s mga lending company po ba if gusto MO n mabayaran ung na loan mo is there any need for termination fees magkanu nman po aabutin non?thanks po

    Reply

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