SEC to hunt down loan sharks, illegal lenders

The government is cracking down on “informal money lenders” or the so-called loan sharks including those engaged in the 5-6 scheme who usually charge exorbitant interest rates or victimize borrowers through fraud, falsification and harassment.

Securities and Exchange Commission (SEC) chairperson Teresita Herbosa said that the agency, on orders from President Duterte himself, will go after persons who engage in lending without primary registration of incorporation and secondary license to extend loans to the public.

Under Section 12 of the Lending Company Regulation Act of 2007, or Republic Act 9474, those who fail or refuse to incorporate and obtain a license from the SEC to engage in lending face a fine of P10,000 to P50,000, or imprisonment of six months to 10 years, or both.

Herbosa said based on SEC records, 3,000 lending companies which failed to go through the full registration process was issued show cause orders with the warning that their primary registration with the SEC will be revoked.

She noted Duterte’s concern about the proliferation of the so-called “5-6” lending system and underscored the need to take drastic measures to address this problem.

To this end, the SEC has initiated investigation into the activities of suspected informal lenders for possible filing of criminal complaints.

Apart from charging them with violation of R.A. 9474, the SEC is likely to include the charge of violation of the Truth in Lending Act which also imposes fine and/or imprisonment. Foreign informal lenders will be referred to the Bureau of Immigration.

Herbosa said among the leads being investigated by SEC were online advertisements of lending, the distribution of flyers, sending text messages and overt lending and collection activities in public places like markets.

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

SEC Extension Office nationwide will spearhead these investigations in their respective territorial jurisdiction.

The Commission is also 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.

The SEC is willing to give registered lending companies, but who have failed to secure a CA, a grace period of six months to one year from notice within which to apply for a CA and comply with all requirements of the SEC.