IRR of RA 9474~Implementing Rules and Regulations of Lending Company Regulation Act of 2007 (Republic Act No. 9474)

IMPLEMENTING RULES AND REGULATIONS
OF LENDING COMPANY REGULATION ACT OF
2007 (REPUBLIC ACT NO. 9474)

RULE 1. Title

These Rules shall be known as the Implementing Rules
and Regulations of Republic Act No. 9474, otherwise
known as the “Lending Company Regulation Act of 2007”
promulgated pursuant to Section 10 thereof.

RULE 2. Definition of Terms

As used in these Implementing Rules, the following
definitions shall apply:

(a) Act shall refer to Lending Company Regulation
Act of 2007.

(b) Affilliate shall refer to a corporation, the
voting stock of which, to the extent of fifty percent
(50%) or less, is owned by a bank or quasi-bank
which is related or linked to such institution
through common stockholders or such other
factors as may be determined by the Monetary
Board of the BSP.

(c) Subsidiary shall refer to a corporation more than
fifty percent (50%) of the voting stock of which
is owned by a bank or quasi-bank.

(d) Branch Office – shall include an extension
office, unit, satellite office, etc. of a lending
company with a Certificate of Authority to operate
as such.

(e) BSP shall refer to the Bangko Sentral ng Pilipinas.

(f) Certificate of Authority (CA) shall refer to a
certificate issued by the SEC in favor of a lending
company to engage in the business of lending
regulated by R.A. No. 9474 and its Implementing
Rules and Regulations.

(g) Charges on loan shall refer to agreed upon interest
rate, service charge, penalty, discount, and such
other charges incidental to lending activity.

(h) Debtor shall refer to a borrower or person
granted a loan by a lending company.

(i) Monetary Assets shall refer to total assets
inclusive of valuation reserves and deferred income
but shall not include investments in real estate, in
shares of stock of real estate development
corporations or in real estate based projects,
leasehold rights and improvements, fixed assets,
foreclosed roperties and prepayments.

(j) Lending company shall refer 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 lending company shall be synonymous with
lending investor.

(k) Networth shall refer to the excess of assets
over liabilities, net of appraisal surplus, unbooked
valuation reserves, capital adjustments,
overstatement of assets and unrecorded liabilities.

(l) Quasi-Bank shall refer to a non-bank financial
institution authorized by the BSP to engage in
quasi-banking functions and to borrow funds from
more than nineteen (19) lenders through the
issuance, endorsement or assignment with
recourse or acceptance of deposit substitutes as
defined in Section 95 of Republic Act No.7653
(the “New Central Bank Act”) for purposes of
relending or purchasing of receivables and other
obligations.

(m) SEC or Commission shall refer to the
Securities and Exchange Commission

(a) Form of Organization

A lending company shall be established as a stock
corporation.

i. Existing Lending Companies organized as
single proprietorships or partnerships shall,
within a period of one (1) year from the
effectivity of the Act, organize themselves
as a stock corporation with the minimum
capitalization prescribed under the Act and
secure a Certificate of Authority to operate
a lending company. Otherwise, they shall
be disallowed from engaging in the
business of granting loans to the public.

ii. The words “Lending Company” or “Lending
Investor” or any other word descriptive
of its primary activity of granting loans to
the public except words commonly used
to identify financing companies shall
always be included in the corporate
and trade name.

(b) Requirements for Securing an Authority – A lending
company shall file with SEC four (4) copies of a duly
accomplished application form to operate as a lending
company, signed under oath by the President, together
with the following documents in the prescribed form:

i. Information Sheet;

ii. NBI clearance of each director/officer;

iii. Foreign directors/officers, in addition to the NBI
Clearance, shall submit a clearance from the Bureau
of Immigration (BI), a photocopy of his passport
showing a valid visa or stay in the Philippines, ACR
i-card, and a work permit issued by the
Department of Labor and Employment;

iv. President’s Sworn Statement and Undertaking
that the corporation will not accept or solicit
investments, other than loans, from more than
19 persons without SEC approval, and upon
presentation of valid claims, it shall immediately
indemnify or return the investments of persons
from said unauthorized public solicitation of
funds; oreover, the sworn statement shall
likewise contain an undertaking that the
country or state of the foreign applicant
allows Filipino citizens and corporations
to do lending business therein.

v. For an existing lending investor applying for a
Certificate of Authority, it shall submit an external
auditor’s sworn statement and undertaking
that based on his/her examination of the corporate
books of accounts and other related records of the
corporation, it has not accepted or solicited
investments, other than loans, from more than
19 persons without prior compliance with
Sections 8 and 12 of the Securities Regulation
Code and its Amended Implementing Rules and
Regulations.

vi. Business plan including method of marketing its
product and sources of the funds and maturities
of credit; and

vii. Statement of its compliance with Rule
17.1(2)(A)(i) and (ii) of the Amended Implementing
Rules and Regulations of the Securities
Regulation Code.

(c) Branches, Extension or Satellites Offices or Units.

i. Loan transactions shall be booked in the
authorized offices of the lending company;
ii. No lending company shall establish or operate
a branch, extension office or unit or satellite office
without prior

approval by the SEC. The following
documents shall be submitted for the
opening of a branch office:
1) Information Sheet on the proposed branch;

2) NBI clearance of the manager, cashier
and administrative officer of the proposed
branch;

iii. The Certificate of Authority to operate a branch,
extension office, unit or satellite office shall be
coterminous with that of the Head Office.

(d) Licensing Fees:

i.Initial Application Fees shall be paid to SEC
at the time of filing of application

1) Head Office –

A fee of 1/10 of 1% of the paid-up
capital of the lending company shall
be paid for the issuance of a Certificate
of Authority to Operate as a Lending
Company.

2) Branch, extension office, unit or
satellite office –

A fee of 1/10 of 1% of the assigned
capital of the branch, extension office,
unit or satellite office shall likewise
be paid for the issuance of an original
Certificate of Authority.

ii. Annual fee –

An annual fee shall be paid not later than forty
five (45) days before the anniversary date of the CA.

1) Head Office – 1/8 of 1% of the
required paid-up capital

2) Branch Office – 1/8 of 1% of the
required paid-up capital

(e) Commencement of Operations

A corporation/company that has been duly registered
and granted a Certificate of Authority to Operate as a Lending
Company shall commence operations within one hundred
twenty (120) days from date of grant of such authority.

Failure to commence operations within said period shall be
a ground for the suspension of its CA.

(f) Lending Companies shall use at least 51% of their funds
for direct lending purposes.

(g) The total investment of a lending company in real
estate and in shares of stock in a real estate development
corporation and other real estate based projects
shall not at any time exceed twenty-five (25%)
percent of its networth.

RULE 4. Capital

(a) A Lending Company shall have a minimum paid-up
capital of One Million Pesos (PhP1,000,000.00),
unless the SEC prescribes a higher minimum
capitalization, if warranted by the circumstances.

i. Lending companies established and in
operation with a lower paid-up capital
prior to the effectivity of the Act shall
comply with the capital requirement
within three (3) years from the date
of effectivity of the Act. For this
purpose, said lending companies
shall, within sixty (60) days from
effectivity of these Rules, provide
the SEC a sworn statement by the
President, indicating the schedule
of their capital build-up within the
three (3) year period.

ii. Should a branch, extension, satellite
office or unit be established, the
excess of the required minimum
paid-up capital may be applied
to the additional capital requirement
for the proposed branch, extension,
satellite office or unit, as follows:

PhP300,000.00 : Metro
Manila and other first
class cities;

PhP150,000.00 : Second
class and other cities;
and

PhP 75,000.00 :
Municipalities

(b) In case of failure to comply with the
aforementioned capital requirement, the authority
of a lending company to operate as such shall
be suspended, after due notice and hearing, for
a period of thirty (30) days.

(a) A majority of the voting stock of the lending company
shall be owned by citizens of the Philippines.

(b) 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.

(c) If the percentage of foreign owned voting stock
in any Lending Company existing prior to the effectivity
of the Act is in excess of forty-nine (49%), it shall
not be increased but may be reduced and once
reduced, shall not be increased thereafter beyond
49% of the voting stock.

(d) No foreign national may be allowed to own stock
unless the country of which he is a national accords
reciprocal rights to Filipinos.

(a) A lending company may grant loans in such amounts
and interest rates and charges as may be agreed upon
between the lending company and the debtor:

(b) In accordance with the Truth in Lending Act and
prior to the consummation of the transaction,
a lending company shall furnish each debtor a
disclosure statement, setting forth, to the extent
applicable, the following information:

i. The principal amount of loan;

ii. Rate of interest of the loan;

iii. Service or processing fee, if any;

iv. Amortization schedule;

v. Any penalty charge for late amortization
payment;

vi. Collection fee, if any;

vii. Notarial fee;

viii. All other fees in connection with the loan
transaction;

ix. Description of the collection and lien
enforcement procedures; and

x. Method of calculating the total amount
of obligation in case of default.

RULE 7. Maintenance of Books of Accounts and Records

(a) Every lending company shall maintain books of
accounts and records as may be required by the SEC
and prescribed by the Bureau of Internal Revenue
and other government agencies. In case a lending
company engages in other businesses, it shall maintain
separate books of accounts for these businesses.

(b) The Manual of Accounts prescribed by the BSP for
lending investors shall continue to be adopted by
lending companies for uniform recording and reporting
of their operations, until a new Manual of Accounts
shall have been prescribed by the SEC.

Lending Companies shall be under the supervision
and regulation of the SEC.

(a) Reports – Lending companies shall file with the
SEC the following reports / manuals in accordance
with the following schedules:

Kind of report / manual	Due Date
General Information Sheet (GIS)	Within thirty (30) days from annual meeting, as stated in its SEC approved bylaws
Audited Financial Statements prepared by an external auditor accredited by the SEC	Within One Hundred Twenty (120) days from end of fiscal year, as stated in its SEC approved bylaws
Special Forms for Financial Statements in Electronic Format	Within thirty (30) days from the last day of submission of the annual Audited Financial Statements
Interim semi-annual financial statements (using Special Form) including the following: • Balance Sheet; • Income and Expense statement; • Cash flow • Statement of Changes in Equity • Schedule of Liabilities • List of Directors and Officers • Aging of Receivables	Every July 15 and January 15

(b) The SEC may examine the Books of Accounts
and other records of the lending company.

(c) Administrative Sanctions – The SEC shall, at its
discretion, impose upon any lending company a basic fine
of P10,000.00 and P100.00 for each day of continuing
violation but such daily fine shall not exceed P50,000.00
for the following:

i. Violation of the Act and its Implementing Rules
and Regulations;

ii. Violation of the terms and conditions of the
Certificate of Authority;

iii. Violation of any lawful order, decision, or
ruling of the Commission;

iv. Unjustified refusal to have its bank of
accounts audited; and

v. Continuous failure to comply with
SEC requirements.

The penalty of suspension shall be imposed in
case of three (3) violations and revocation in
case of four (4) violations.

Lending companies shall be under the supervision and
regulation of the SEC, Provided, those lending
companies which are subsidiaries and affiliates of
banks and quasi-banks shall be subject to BSP
supervision and examination in accordance with
Republic Act No.7653.

RULE 10. Acts Punishable and Persons Liable

A fine of not less than Ten Thousand Pesos
(PhP10,000.00) and not more than Fifty
Thousand Pesos (PhP50,000.00) or imprisonment
of not less than six months but not more than
ten (10) years or both, at the discretion of the court,
shall be imposed upon:

(a) Any person who shall engage in the business
of a lending company without a validly subsisting
authority to operate from the SEC;

(b) The president, treasurer and other officers
of a corporation, including the managing officer
thereof, who shall knowingly and willingly

i. Engage in the business of a lending
company without a validly subsisting
authority from the SEC;

ii. Hold themselves out to be a lending
company, either through advertisement
on whatever form, whether in its
stationery, commercial paper, or
other document, or through other
representations;

iii. Make use of a trade or firm name
containing the words lending company
or “lending investor” or any other
designation that would give the public
the impression that it is engaged in
the business of a lending company as
defined in the Act without the
appropriate SEC authority; and

(c) Violators or violations of the provisions of the Act;

(d) Any officer, employee or agent of a lending
company who shall:

i. Knowingly and willingly make any
statement in any application, report,
or document required to be filled under
the Act, which statement is false or
misleading with respect to any
material fact;

ii. Overvalue or aid in overvaluing any
security for the purpose of influencing in
any way the action of the company in
any loan;

(e) Any officer, employee or examiner of the SEC
directly charged with the implementation of the
Act or of other government agencies who shall
commit, connive, aid, or assist in the commission
of acts enumerated under Subsection 1 and 2
of this Rule.

RULE 11. Applicability of Other Laws

The provisions of Republic Act No. 3765, otherwise
known as the “Truth in Lending Act of the Philippines,”
Republic Act No. 7394 or the “Consumer Act of the
Philippines” and other existing laws, insofar as
they are not in conflict with any provisions of
this Act, shall have a suppletory applicability to
Lending Companies.

RULE 12. Effectivity of Implementing Rules and
Regulations These Implementing Rules and Regulations
shall take effect fifteen (15) days from publication
in two (2) newspapers of general circulation.

Adopted by the Commission En Banc on August 23, 2007.

Mandaluyong City, Philippines.

FE B. BARIN
Chairperson

MA. JUANITA E. CUETO       JESUS ENRIQUE G. MARTINEZ
Commissioner                           Commissioner

RAUL J. PALABRICA              THADDEUS E. VENTURANZA
Commissioner                          Commissioner