The Securities and Exchange Commission (SEC) has finalized a policy that tightens the cap on interest rates and related fees charged by financing and lending companies for specific loans, a month after the draft was released for public comment.

The Commission issued SEC Memorandum Circular No. 14, Series of 2025 on Dec. 10, establishing the “Recalibrated Ceilings on Interest Rates and Other Fees Charged by Financing Companies and Lending Companies.” The policy aims to protect financial consumers and promote competitiveness within the industry.

The SEC adopted the measure under the authority granted by Section 6(a) of the Financial Products and Services Consumer Protection Act (FCPA), which allows the Commission to determine the reasonableness of interest and fees demanded by a financial service provider.

“The recalibrated interest rate cap offers a balanced and sustainable framework that considers the interests of both lenders and borrowers, consistent with the Commission’s mandate of promoting consumer protection while also ensuring the viability of legitimate financing and lending companies,” said SEC Chairperson Francis Lim.

The effective interest rate (EIR) is now capped at 12 percent per month, or approximately 0.40 percent per day. EIR refers to the total nominal interest plus other fees and charges (excluding penalty and late payment fees), expressed as the rate that discounts estimated future cash flows throughout the loan to the net amount of loan proceeds.

The Monetary Board, in consultation with the SEC, previously set the EIR ceiling at 15 percent per month, or about 0.5 percent per day.

Meanwhile, the nominal interest rate limit is set at six percent per month, or 0.20 percent per day.

The ceiling for penalties for late and non-payment is fixed at five percent per month on the outstanding scheduled amount due. Furthermore, the total cost cap—covering all interest, other fees, charges, and penalties—is set at 100 percent of the total amount borrowed, regardless of how long the loan has been outstanding.

The recalibrated ceilings apply to unsecured, general-purpose loans offered by financing and lending companies with principal amounts not exceeding ₱10,000 and payment terms of up to four months. The new rates will apply to loans entered into, restructured, or renewed starting April 1, 2026.

The SEC explicitly stated that any attempt to circumvent the cap—including through restructuring, repackaging, splitting of loan amounts, recharacterization of fees, or any analogous scheme—will constitute a violation.

The Commission may impose administrative sanctions against offending financing and lending companies, as well as their responsible officers, under the Financing Company Act of 1998, the Lending Company Regulation Act of 2007, and the FCPA.

For the First Offense, companies will be meted with an administrative penalty of ₱50,000.

For the Second Offense, the SEC may impose a fine equivalent to at least twice the penalty imposed for the first offense, but not more than ₱1 million, and/or suspend a company’s financing and lending activities for 60 days.

For the Third Offense, the SEC shall revoke the erring company’s certificate of authority and certificate of incorporation.

The SEC noted that the ceilings policy will be subject to a periodic review to ensure it remains aligned with changes in law, industry needs, and regulatory requirements.