SEC lowers interest rate cap for lending firms

Upgrade to High-Speed Internet for only ₱1499/month!

Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.

Visit Suniway.ph to learn

December 12, 2025 | 12:00am

MANILA, Philippines —  The cap on interest rates and related fees charged by financing and lending companies for specific loans has been tightened by the Securities and Exchange Commission (SEC) to protect financial consumers and promote the industry’s competitiveness.

The SEC has issued Memorandum Circular 14, Series of 2025, providing for recalibrated ceilings on interest rates and other fees charged by financing and lending companies.

Under the circular, the effective interest rate is now capped at 12 percent per month, or about 0.4 percent per day.

The rate refers to the total nominal interest paid plus other fees and charges, excluding penalty and late payment fees, expressed as the rate that exactly discounts estimated future cash flows throughout the loan to the net amount of loan proceeds.

The ceiling for effective interest rates was previously set at 15 percent per month, or about 0.5 percent per day.

Lending and financing companies, meanwhile, may not charge nominal interest rates exceeding six percent per month, equivalent to 0.2 percent per day.

The ceiling for penalties for late and non-payment is fixed at five percent per month on the outstanding scheduled amount due, while the total cost cap is set at 100 percent of the total amount borrowed, applying to all interest, other fees and charges as well as penalties, regardless of the time the loan has been outstanding.

The SEC said the recalibrated ceilings would cover unsecured and general-purpose loans offered by financing and lending companies with principal amounts not exceeding P10,000 and payment terms of up to four months.

It will apply to loans entered into, restructured or renewed beginning April 1, 2026.

“The recalibrated interest rate cap offers a balanced and sustainable framework that considers the interests of both lenders and borrowers, consistent with the commission’s mandate of promoting consumer protection while also ensuring the viability of legitimate financing and lending companies,” SEC chairperson Francis Lim said.

The Financial Products and Services Consumer Protection Act (FCPA) grants the SEC the authority to determine the reasonableness of the interest charges or fees which a financial service provider may demand, collect or receive for any service or product offered to a financial consumer.

The SEC said any attempt to circumvent the interest rate cap through restructuring, repackaging, splitting of loan amounts, recharacterization of fees, shifting of loan tenor, simulated collateral, sham guaranty arrangements, imposition of disguised charges or any analogous scheme will constitute a violation of the memorandum circular.

Failure to comply with the interest rate limits will be meted with an administrative penalty of P50,000 for the first offense for financing and lending companies.

A second offense may result in the imposition of a fine equivalent to at least twice the penalty imposed for the first offense, but not more than P1 million, and/or suspension of a company’s financing and lending activities for 60 days.

For the third offense, the SEC will revoke the erring company’s certificate of authority and certificate of incorporation.

The SEC said the policy on ceilings on interest rates and other fees will be subject to a periodic review to ensure it remains aligned with changes in law, industry needs and regulatory requirements.