SEC Suspended 84 Lending Companies Posted 23 March 2017

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SEC SUSPENDED 84 LENDING COMPANIES

The Securities and Exchange Commission recently suspended the primary license of 84 lending companies which failed to obtain a secondary license, or a Certificate of Authority (CA) to Operate as a Lending Company required under Republic Act No. 9474 or the Lending Company Regulation Act of 2007.

The SEC is the lead agency in the administration of said law. Section 4 of R.A. 9474 states that “xxx No lending company shall conduct business unless granted an authority to operate by the SEC”.

Earlier, SEC sent out more than 300 Show Cause Letters, not only once but twice, to registered companies engaged in lending who have not secured a CA to Operate as a Lending Company. The Show Cause Letters required the companies to explain why their certificates of registration (as a corporation) should not be suspended in view of the failure to secure CA.

Out of the 300 or so second Show Cause Letters, 84 were returned to sender.

In view of their failure to respond to the Show Cause Letters, these 84 companies shall therefore be suspended for 60 days, and if they still do not respond within the suspension period, proceedings for revocation of their certificates of registration shall immediately ensue.

Section 3 of R.A. 9474 provides that “Lending Company shall refer to a corporation engaged in granting loans from its own capital funds or from funds sourced from not more that nineteen (19) persons. It shall not be deemed to include banking institutions, investment houses, savings and loan associations, financing companies, pawnshops, insurance companies, cooperatives and other credit institutions already regulated by law.  The term shall be synonymous with lending investors.”

Further, Section 4 of R.A. 9474 mandates that “Form of Organization. – A lending company shall be established only as a corporation: Provided, that existing lending investors organized as single proprietorships or partnerships shall be disallowed from engaging in the business of granting loans to the public one year after the date of effectivity of this Act. No lending company shall conduct business unless granted an authority to operate by SEC”.

R.A. 9474 was approved on 22 May 2007 and one year after the effectivity of the Act or on 12 June 2008, all persons and entities engaged in lending activity should have secured their corresponding CAs.

Director Justina F. Callangan, of the SEC’s Corporate Governance and Finance Department, tasked to regulate lending companies, explained that R.A. 9474 was approved on 22 May 2007 and one year after the effectivity of the law or on 12 June 2008, all persons and entities engaged in lending activity should have secured their corresponding CAs. She underscored the fact that said entities have been given more than sufficient time to comply with the law, hence, their continued noncompliance warrants their suspension.

“The Commission is one with the President in adopting tough stance against illegal lending that is why it is pursuing with much vigor all those engaged in it”, Director Callangan added.

Aside from suspension, per Section 12 of R.A. 9474, a fine of not less than Ten Thousand Pesos (Php 10,000.00) or imprisonment of not less that six (6) months but not more than ten (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.

  The List of the suspended 84 lending companies.