Interest rates

MB caps interest rates and fees on low-value loans

THE Monetary Board (MB) caps interest rates, penalties and other fees and charges on low value, short term, general purpose, and unsecured loans provided by loan companies (LCs), loan companies financing (FC) and their lending platforms (PLO) to mainly low-income borrowers.

In a statement released Thursday, the Bangko Sentral ng Pilipinas (BSP) said the MB had set the cap on the nominal interest rate at 6% per month or 0.2% per day. This is the amount of interest paid on the loan, excluding other fees and charges.

The effective interest rate is capped at 15% per month or 0.5% per day. This covers nominal interest rates and applicable fees such as processing fees, service fees, notary fees, processing fees, and audit fees, among others, but excludes fees and penalties for payment. late or non-payment.

The maximum penalty for late payment or non-payment of the loan is 5% per month.

Interest rate ceilings apply to loans not exceeding 10,000 pesos and to acreage payable within four months or less.

“By determining the interest rate ceilings, the Bangko Sentral ng Pilipinas [BSP] sought to maintain a balance between protecting consumers and allowing loan and finance companies to take credit risks into account and remain viable, ”said BSP Governor Benjamin E. Diokno.

Interest rate caps will be subject to periodic review by the BSP, as well as the Securities and Exchange Commission (SEC) and industry.

As the primary regulator of LCs, CFs and their PLOs, the SEC is responsible for formulating and promulgating the publication of implementing rules and regulations within 60 days of the effective date of the corresponding circular.

The Central Bank said it was “committed to protecting financial consumers and promoting an enabling environment for lenders such as LCs, CFs and their PLOs to sustainably meet the needs of low-income borrowers in the middle. pandemic ”.