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SEC starts crackdown on loan sharks

The Securities and Exchange Commission (SEC) has intensified its campaign against the proliferation of informal lenders, with at least 3,512 lending companies now on the risk of being suspended as the government tightens its noose against loan sharks, commonly known as 5-6 operators.

SEC Chairperson Teresita Herbosa said these lending companies will be suspended if they would not comply with certain regulatory requirements.

Herbosa said the corporate regulatory watchdog will run after informal lenders or people who engage in lending without primary registration of incorporation and secondary license from the SEC.

SEC logo (MB File Photo)

SEC logo (MB File Photo)

At present, Herbosa said, there are more than P3 billion worth of loans from informal lenders going around the economy. This is the same value of loans from legitimate microfinance organizations.

“Because of the tough stance that the present administration under President Rodrigo Duterte has taken against informal lenders, the SEC has initiated investigation into the activities of suspected informal lenders for possible filing of criminal complaints,” Herbosa said in an interview with reporters Thursday.

Per Section 12 of the Lending Company Regulation Act of 2007 (RA 9474), a fine of not less than P10,000 and not more than P50,000 or imprisonment of not less than six months but not more than 10 years or both await those who violate the law through, among others, failure or refusal to incorporate and obtain a license from the SEC to engage in lending.

SEC specifically requires lending companies with the primary purpose of lending to obtain  Certificate of Authority (CA).

“The SEC has issued more show cause letters to about 3,512 companies with the warning that their primary registration with the SEC will be revoked if they fail to obtain a CA and may be held liable for fines and penalties,” Herbosa said.

These companies were given grace period of six months. She only said that only 900 had so far submitted a CA.

Apart from charging informal lenders with violation of RA 9474, the SEC is likely to include the charge of violation of the Truth in Lending Act which likewise imposes fine and imprisonment.

Among the leads being investigated by SEC are online advertisement of lending, the distribution of flyers, sending of text messages, and overt lending and collection activities in public places like markets.

Herbosa said that the agency has heard that many of the informal lenders adopted ways for the borrowers to be imprisoned.

She said the SEC is now studying how to help borrowers who have been victimized by informal lenders into making it appear that instead of a simple loan, they have purchased an appliance through credit.

Upon default, these borrowers are charged criminally for estafa which is a circumvention of the prohibition against imprisonment for non-payment of debt.

“We’ve also gotten information that these informal lenders charge as high as 7 percent per month, 84 percent per annum, almost double of the value lent,” Herbosa further said.

Herbosa said the SEC is now coordinating with the local government units and law enforcement agencies in the conduct of surveillance and entrapment operations.