Frequently Asked Questions

1) Compliance with the requirements in forming an ordinary stock corporation, such as reservation of corporate name, filing of incorporation documents, submission of downloadable forms and payment of corresponding fees.

2) A minimum paid-up capital of P1,000,000.00.

3) Obtaining a Certificate of Authority to engage in lending business activities, as issued by the SEC, after compliance with the requirements in forming an ordinary stock corporation.

The SEC has no authority over a lending company when it does not violate any provision of the Corporate Code, the Lending Company Regulation Act or any other laws regulating lending companies.

If the allegations of the complaint pertain to acts which may give rise to criminal/civil liabilities, the same should be filed before the regular courts which has jurisdiction over the subject matter. The complainant is advised to secure the assistance of a lawyer to fully protect his/her rights and interests.

The Commission may give assistance to the complainant by calling for a conference with the respondent lending company, subject to the consent and willingness of both parties to participate.

Section 7 of R.A. No. 9474 on ‘Amounts and Charges on Loans’ states that “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: Provided, That the agreement shall be in compliance with the provisions of R.A. No. 3765, otherwise known as the “Truth in Lending Act” and R.A. No. 7394, otherwise known as the “Consumer Act of the Philippines”; Provided, further, That the Monetary Board, in consultation with the SEC and the industry, may prescribe such interest rates as may be warranted by prevailing economic and social conditions.

Before transacting with a lender, the individual should check the rates provided by the SEC in order for him/her to compare the available rates being charged.

The Supreme Court already ruled that imposition of usurious interest rates such as “5-6 money lending” is illegal. The legality or illegality of the contract stipulation entered into by the parties is subject to the court’s determination.

Stipulations authorizing the imposition of iniquitous or unconscionable interest rates are contrary to morals, if not against the law. Under Article 1409 of the Civil Code, these contracts are inexistent and void ab initio or void from the beginning. They cannot be ratified nor can the right to set up their illegality as a defense be waived.

The nullity of the stipulation on the usurious interest does not, however, affect the lender’s right to recover the principal of the loan, nor would it affect the terms of the real estate mortgage. The right to foreclose the mortgage remains with the creditors and said right can be exercised upon the failure of the debtors to pay the debt due. The debt due is to be considered without the stipulation of the excessive interest. A legal interest of 12% per annum will be added in place of the excessive interest formerly imposed.

A contract or conduct apparently honest and lawful must be treated as such until it is shown to be otherwise by either positive or circumstantial evidence. A duly executed contract carries with it the presumption of validity. The party who impugns its regularity has the burden of proving its simulation.

The Commission has no authority to rule upon the validity of a contract and the stipulation therein. Thus, existing loans, unless declared null and void, may be considered as receivables upon incorporation of an entity.

Existing loans should be compliant with the requirements of the law, otherwise, it cannot be considered as a receivable upon incorporation.