200 informal lenders seek SEC license following crackdown on ‘five-six’

Over 200 informal lenders have applied for registration before the Securities and Exchange Commission (SEC) after the gov­ernment initiated a crackdown against loan sharks engaged in “five-six” and other usurious practices.

The SEC said this was among the initial results of the investigations conducted by the teams it had dispatched in Octo­ber last year in response to Pres­ident Duterte’s directive for the government to get tough against “five-six” lenders.

“Five-six” lenders usually extend loans without collateral or any documentary require­ments, but charge their borrow­ers an exorbitant nominal inter­est rate of 20 percent or more over an agreed period.

“The SEC has initiated in­vestigation into the activities of suspected informal lenders for possible filing of criminal com­plaints,” said SEC chairperson Teresita Herbosa in her report to Finance Secretary Carlos Dominguez III.

“Apart from charging them with violation of Republic Act 9474 (Lending Company Reg­ulation Act), the SEC is likely to include the charge of violation of the Truth in Lending Act which likewise imposes fine and/or im­prisonment. Foreign informal lenders will be referred to the Bureau of Immigration,” she told Dominguez.

Herbosa said in her report that the SEC is now looking into online advertisements, flyers, text messaging promos, and overt and collection activities in areas like public markets to investi­gate and expose informal lenders and file the appropriate charges against them.

The SEC-led investigations were started in coordination with local government units, the De­partment of Trade and Industry, National Bureau of Investigation and law enforcement agencies.

Following President’ Duter­te’s directive, the SEC issued two advisories to inform the public about prohibited lending prac­tices under the law and encour­age informal lenders to register with the Commission.

The first advisory, issued in October last year, cited provi­sions of RA 9474, or the Lending Company Regulation Act, which makes it illegal to act as a lending company or investor unless reg­istered with the Commission as a lending company.

“The said law mandates lending companies to organize only as corporations, making it illegal for individuals to engage in the business of lending with­out being registered as a corpo­ration with the Commission and secure the required Certificate of Authority,” Herbosa said.

Herbosa said the SEC is­sued a follow-up advisory in November last year to encourage “five-six” lenders to register.

The second advisory warned informal lenders fac­ing complaints for violations of RA 9474 and/or those engaging in “fraudulent, oppressive and illegal practices in lending to borrowers including those vio­lating the Truth in Lending Act,” that they will be investigated for possible prosecution.