LENDING COMPANY REGULATION ACT OF 2007

Case Overview and Summary

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