QuestionsQuestions (Republic Act No. 9474)
RA 9474 is the “Lending Company Regulation Act of 2007.” Its policy is to regulate the establishment and operation of lending companies, ensure sound and stable conditions for lending, prevent and mitigate practices prejudicial to public interest, and set minimum standards for entities allowed to engage in lending.
A lending company is a corporation engaged in granting loans from its own capital funds or funds sourced from not more than nineteen (19) persons. It excludes banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives, and other credit institutions already regulated by law.
A debtor is a borrower or the person granted a loan by the lending company.
Quasi-bank is a non-bank financial institution authorized by the BSP to engage in quasi-banking functions and borrow from more than nineteen (19) lenders via deposit substitutes as defined under RA 7653, for purposes of relending or purchasing receivables. Subsidiary refers to a corporation where more than 50% of voting stock is owned by a bank or quasi-bank. Affiliate refers to a corporation where up to 50% of voting stock is owned by a bank or quasi-bank, related or linked through common stockholders or other factors determined by the BSP.
A lending company must be established only as a corporation.
Their engagement in granting loans to the public is disallowed one year after the date of effectivity of the Act.
No. No lending company may conduct business unless granted an authority to operate by the SEC.
The minimum paid-in capital is at least P1,000,000.00 for lending companies established after the effectivity of the Act.
Existing lending companies must comply within a time prescribed by the SEC, but not less than three years from the effectivity of RA 9474. The SEC may prescribe a higher minimum capitalization if warranted by circumstances.
At least a majority of the voting capital stock must be owned by Philippine citizens upon the effectivity of the Act.
If foreign-owned voting stock exceeds 49%, it shall not be increased; it may be reduced, and once reduced, it shall not be increased thereafter beyond 49% of the voting stock.
No foreign national may be allowed to own stock unless the country of which he is a national accords reciprocal rights to Filipinos.
Loans may be granted in amounts and reasonable interest rates and charges as agreed between the company and debtor, but agreements must comply with RA 3765 (Truth in Lending Act) and RA 7394 (Consumer Act). The Monetary Board may also prescribe interest rates based on prevailing economic and social conditions.
Each lending company must maintain books of accounts and records required by the SEC and prescribed by the Bureau of Internal Revenue and other government agencies. If it engages in other businesses, it must maintain separate books for those businesses. It must also issue appropriate instruments/documents evidencing lending and borrowing transactions.
Lending companies are under SEC supervision and regulation. Exception: lending companies that are subsidiaries and affiliates of banks and quasi-banks are subject to BSP supervision and examination under RA 7653 (New Central Bank Act framework). The Monetary Board may also order examination of their books if the lending company is believed to be used as a conduit to circumvent BSP rules.
A fine of not less than P10,000 and not more than P50,000 or imprisonment of not less than six months and not more than ten years, or both, at the court’s discretion. Liability includes those who operate without SEC authority; corporate officers who knowingly and willingly engage in or misrepresent lending company status or violate the Act; employees/agents who make false/misleading statements or aid in overvaluing securities to influence loans; and SEC officers/examiners who commit/aid acts enumerated in the penalty provisions.