SEC Compliance Requirements for Lending Companies in the Philippines
Unfair Debt Collection Practices! SEC Clarifies Compliance Requirements for Newly Registered Financing and Lending Companies in the Philippines

Unfair Debt Collection Practices! SEC Clarifies Compliance Requirements for Newly Registered Financing and Lending Companies in the Philippines

Posted on March 1, 2021
3 mins read

The SEC has recently provided clarification on specific compliance requirements regarding newly registered Financing Companies and Lending Companies in the Philippines.

This clarification relates to a 2019 SEC Memorandum Circular which sought to prohibit and restrict unfair debt collection practices by Financing and Lending Companies.

In this article, we outline the key provisions of this newest SEC Memorandum Circular and what it means for Financing and Lending Companies in the Philippines.

Financing Companies and Lending Companies in the Philippines

In the jurisdiction of the Philippines, there are specific rules and compliance requirements governing Lending Companies and Financing Companies, both of which operate under the supervision and regulation of the SEC.

There are subtle but important differences between each type of company from the perspective of compliance.

For a more comprehensive Explainer on the compliance requirements for Financing and Lending Companies, it might also be helpful to check out one of our previous articles – Compliance for Lending and Financing Companies in the Philippines

SEC  Memorandum  Circular  No.  18, Series of 2019

In August 2019, the SEC issued Memorandum  Circular  No.  18,  Series  of  2019, entitled “Prohibition  on Unfair Debt Collection Practices of Financing Companies (FC) and Lending Companies (LC)”.

That Memorandum Circular sought to prevent Financing Companies and Lending Companies from harassing borrowers and engaging in unethical, abusive and/or unfair practices when seeking to collect debts. This would apply whether the entity was collecting debts itself or via a third party service provider.

While M.C. No. 18, Series of 2019 included various provisions to support the prohibition on unfair collection practices in the Philippines, for the purposes of this article, we are focusing specifically on Section 4 of M.C. No. 18, Series of 2019.

Section 4 provides that Financing and Lending Companies are required to adopt policies and procedures to require that the people handling the collection of their debts, whether in-house persons or third party providers, disclose their full name and true identity to each borrower. Section 4 also requires Financing and Lending Companies to create a Customer Service Department or designate specific individuals who will be required to address complaints and concerns from borrowers.

Importantly, for the purpose of this article, Section 4 also requires the President or CEO and the Compliance Officer of the Financing and Lending Companies to submit a Sworn Certificate confirming that the company is complying with the provisions of Section 4.

This Sworn Certificate was required to be sworn and submitted to the SEC within 30 days of the effective date of that Memorandum Circular – the effective date being 8 September 2019.

What is the Purpose of SEC Memorandum No. 02 Series of 2021? 

SEC MC No. 02 s. 2021, entitled “Compliance with Section 4 of  SEC  Memorandum Circular  No.  18,  Series  of  2019  for  Newly  Registered Financing Companies (FCs) and Lending Companies (LC)” is dated 11 February 2021.

The purpose of MC. No. 02, Series of 2021 is to clarify the required period for the submission of the Sworn Certificate (see reference to Section 4 above) for Financing and Lending Companies that were incorporated after M.C. No. 18, Series of 2019 came into effect (i.e. 8 September 2019).

When does SEC Memorandum No. 02 Series of 2021 take Effect? 

This Memorandum Circular shall take effect immediately after its  publication in two national newspapers of general circulation and its posting on the Commission’s website.

SEC MC No.2 S. 2021 was published on the SEC website and was also published in 2 national newspapers on 17 February 2021 (i.e. the effective date).

What are the Requirements under SEC Memorandum No. 02 Series of 2021? 

SEC MC No. 2, Series of 2021 includes three 3 main provisions. It provides that:

  • Any Financing and Lending Companies that were incorporated between 8 September 2019 and the effective date of SEC MC. No. 2 S. 2021 (i.e. 17 February 2021) must submit the Sworn Certificate within 30 calendar days of the effective date of SEC MC. No. 2 S. 2021 (i.e. 17 February 2021).

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DISCLAIMER: This article is strictly for general information purposes only. Nothing in this article constitutes or intends to constitute financial, accounting, regulatory or legal advice and must not be used as a substitute for professional advice. It is still necessary to consult your relevant professional adviser regarding any specific matter referenced above.

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