LENDING COMPANY REGULATION ACT OF 2007

Republic of the Philippines
Congress of the Philippines
Metro Manila

Thirteenth Congress
Third Special Session

 

Begun and held in Metro Manila, on Monday, the nineteenth day of February, two thousand seven.

Republic Act No. 9474             May 22, 2007

AN ACT GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION OF LENDING COMPANIES

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

SECTION 1. Title. - This Act shall be known as the ""Lending Company Regulation Act of 2007"".

SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to regulate the establishment of lending companies and to place their operation on a sound, efficient and stable condition to derive the optimum advantages from them as an additional source of credit; to prevent and mitigate, as far as practicable, practices prejudicial to public interest; and to lay down the minimum requirements and standards under which they may be established and do business.

SEC. 3. Definition of Terms. - For purposes of implementing this Act,...

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Title: Lending Company Regulation Act of 2007

Declaration of Policy (Section 2):
- Regulate establishment and operation of lending companies
- Ensure sound, efficient and stable condition of lending companies
- Prevent prejudicial practices against public interest
- Set minimum requirements and standards for lending companies

Definitions (Section 3):
- Lending Company: Corporation engaged in granting loans from own capital or funds from up to 19 persons; excludes banks, investment houses, etc.
- Debtor: Borrower granted a loan by lending company
- Quasi-Bank, Subsidiary, Affiliate: Defined in relation to banks/quasi-banks
- SEC: Securities and Exchange Commission
- BSP: Bangko Sentral ng Pilipinas

Form of Organization (Section 4):
- Lending company must be a corporation
- Existing non-corporate lending investors disallowed after 1 year
- SEC authority required to conduct business

Capital (Section 5):
- Minimum paid-in capital: ₱1,000,000 for new companies
- Existing companies must comply within 3 years, higher capital may be prescribed

Citizenship Requirements (Section 6):
- Majority voting capital stock owned by Filipino citizens
- Foreign ownership capped at 49%, cannot increase if higher
- Reciprocity required for foreign nationals

Loans and Charges (Section 7):
- Loan amounts and interest rates agreed between company and debtor
- Must comply with Truth in Lending Act and Consumer Act
- Monetary Board may prescribe interest rates

Books and Records (Section 8):
- Maintain books and records required by SEC, BIR, other agencies
- Separate books for other businesses
- Adopt BSP Manual of Accounts until new one prescribed
- Issue instruments/documents for lending and borrowing

SEC Authority (Section 9):
- Create division/bureau to regulate lending companies
- Issue rules and regulations for implementation
- Require reports from lending companies
- Exercise visitorial powers
- Impose administrative sanctions for violations

Implementation (Sections 10-11):
- SEC to issue rules and regulations within 3 months
- Delineation of authority between SEC and BSP for subsidiaries/affiliates
- BSP may examine if used to circumvent rules

Penalties (Section 12):
- Fines of ₱10,000 - ₱50,000 and/or 6 months - 10 years imprisonment for:
- Operating without SEC authority
- Misrepresenting as a lending company
- False statements in reports/documents
- Overvaluing securities
- SEC/agency personnel conniving in violations

Other Provisions (Sections 13-16):
- Other relevant laws apply if not conflicting
- Repealing and separability clauses
- Effectivity 15 days after publication in newspapers