By Alexandria Grace C. Magno
THE Securities and Exchange Commission (SEC) has issued a memorandum imposing recalibrated ceilings on rates of interest and charges charged by financing and lending firms on small consumer loans.
Memorandum Circular (MC) No. 14, Series of 2025, sets a 6% per thirty days cap on nominal rates of interest and a 12% monthly cap on effective rates of interest for loans of as much as P10,000 with terms of as much as 4 months.
Previously, the Monetary Board and the SEC allowed a maximum effective rate of interest of 15% per thirty days.
“The recalibrated rate of interest cap offers a balanced and sustainable framework that considers the interests of each lenders and borrowers, consistent with the Commission’s mandate of promoting consumer protection while also ensuring the viability of legitimate financing and lending firms,” SEC Chairperson Francisco Ed. Lim said in an announcement on Thursday.
Nominal rate of interest (NIR) refers to the fundamental rate charged on the principal without additional fees, while effective rate of interest (EIR) reflects the overall cost of the loan by including mandatory fees, in step with Truth in Lending Act rules.
“The brand new rules are intended to assist probably the most vulnerable segment of monetary consumers, particularly those that avail of small loans to deal with every day expenses or emergencies,” China Bank Capital Corp. Managing Director and University of the Philippines College of Law Senior Lecturer on Credit Transactions Juan Paolo E. Colet said in a Viber message.
“It’s a timely move that ought to remind lenders that loans have to be a virtuous means of monetary empowerment and economic productivity moderately than a tool for profiteering that forces people right into a debt spiral,” he added.
“The rate of interest cap reduces the danger of micro, small, and medium enterprises (MSMEs) falling right into a debt trap and may encourage borrowers to transact with regulated lenders. In turn, this enhances credit risk visibility and should expand lending activities between MSMEs and bigger banks,” AP Securities, Inc. Equity Research Analyst Shawn Ray R. Atienza said.
MC No. 14 also limits late-payment penalties to five% per thirty days of the outstanding scheduled amount and sets a complete cost cap in order that interest, fees, charges, and penalties cannot exceed 100% of the unique loan amount. The caps will apply to loans made, restructured, or renewed starting April 1, 2026.
“A complete cost cap of 100% of the quantity borrowed applies to all interest, other fees and charges, and penalties, whatever the loan’s outstanding duration,” the memorandum said.
Mr. Colet noted that the SEC’s caps are aligned with borrower risk and prevailing economic conditions. “Regulating consumer financing costs shouldn’t be unusual, because the Bangko Sentral ng Pilipinas has set limits on bank card rates of interest. A transparent framework advantages each lenders and consumers, providing access to credit at a good cost.”
Violations of the brand new loan pricing ceilings carry penalties starting from a P50,000 effective for the primary offense, to a P1-million effective and a 60-day suspension for the second. A 3rd offense may end in revocation of the corporate’s Certificate of Authority and Certificate of Incorporation.
The SEC also warned that attempts to bypass the caps — corresponding to restructuring or repackaging loans, disguising fees, or other similar methods — could also be treated as separate violations, which may result in administrative, civil, or criminal motion under existing laws.