Definitions
- Lending Company: Corporation granting loans from its own capital or from funds sourced from not more than 19 persons; excludes banks, investment houses, cooperatives, and other credit institutions regulated separately.
- Debtor: Borrower from a lending company.
- Quasi-Bank: Non-bank financial institution authorized by BSP with broader funding sources.
- Subsidiary and Affiliate definitions linked to ownership by banks or quasi-banks.
- Acronyms SEC and BSP refer to Securities and Exchange Commission and Bangko Sentral ng Pilipinas, respectively.
Form of Organization and Licensing
- Lending companies must be corporations.
- Existing lending investors in sole proprietorships or partnerships must cease business one year after law effectivity.
- Lending companies operate only with SEC’s authority.
Capitalization Requirements
- New lending companies require a minimum paid-in capital of P1,000,000.
- Existing companies must comply within a prescribed period not less than three years.
- SEC may impose higher minimum capitalization if needed.
Citizenship Limitations
- Majority ownership must be Filipino upon effectivity.
- Foreign ownership cannot exceed 49%, and reductions cannot be reversed.
- Foreign ownership measured based on citizen stockholders; reciprocal rights required.
Loan Amounts and Charges
- Lending companies may charge reasonable interest, subject to agreement and compliance with Truth in Lending Act and Consumer Act.
- Monetary Board may prescribe maximum interest rates based on economic and social factors.
Record-Keeping and Documentation
- Lending companies must maintain books in compliance with SEC, BIR, and other agencies’ requirements.
- Separate accounting for other businesses if applicable.
- Manual of Accounts prescribed by BSP remains applicable until modified by SEC.
- Lending transactions must be evidenced by appropriate documents.
Regulatory Authority of SEC
- SEC empowered to create a dedicated division for lending company regulation.
- Authority to issue implementing rules, establish minimum capitalization, marketing restrictions, and more.
- Can require regular and special reports and exercise visitorial powers.
- Can impose sanctions including suspension, revocation, and fines.
Rulemaking and Implementation
- SEC to issue implementing rules within three months of law's approval.
Jurisdictional Boundaries
- Lending companies fall under SEC supervision.
- Subsidiaries and affiliates of banks/quasi-banks under BSP supervision.
- BSP can order examination if lending companies are suspected of being conduits to circumvent regulations.
Penalties and Sanctions
- Operating without SEC authority subjects to fines (P10,000 to P50,000), imprisonment (six months to ten years), or both.
- Officers who knowingly violate the law or misrepresent the company commit penal offenses.
- False statements and overvaluation in lending transactions punishable.
- Government officers aiding violations are also liable.
Application of Other Laws
- Truth in Lending Act and Consumer Act apply to lending companies where not inconsistent with this Act.
Repealing, Separability, and Effectivity
- Conflicting laws, executive orders and regulations repealed or amended.
- If any part is held invalid, other provisions remain effective.
- Law takes effect 15 days after publication in two national newspapers.