MANILA – The Securities and Exchange Commission (SEC) has officially capped the nominal monthly interest rate at 6% (with an effective rate ceiling of 12% including all fees) for all loans of P10,000 and below, effective April 1, 2026. The landmark rule, contained in SEC Memorandum Circular No. 14, series of 2025, also limits late-payment penalties to 5% per month on overdue amounts and imposes a total cost-of-credit ceiling that covers every peso of charges except penalties.
The regulation directly targets the predatory practices of many online lending apps and micro-finance companies that have been charging effective rates as high as 30–50% per month on small, short-term loans.
Key Provisions at a Glance
| Item | New Cap (Effective April 1, 2026) |
|---|---|
| Nominal interest rate | 6% per month (0.2% daily) |
| Effective interest rate | 12% per month (0.4% daily) — includes all fees & charges |
| Late-payment penalty | 5% per month on overdue amount only |
| Total cost of credit | Applied to the entire principal (excludes penalties) |
| Covered loans | All new loans, renewals, or restructurings of ≤ P10,000 |
SEC Chairperson Emilio B. Aquino emphasized the balance:
“This recalibrated ceiling is necessary to uphold consumer protection while ensuring the continued viability and competitiveness of legitimate financing and lending companies.”
Why It Matters
- Over 75% of adult Filipinos have encountered at least one online lending scam in the past year (Global Anti-Scam Alliance 2025 report).
- Many 5-6 or “bombay” style lenders and unregistered apps routinely charge 20–50% monthly, turning a P5,000 loan into a P15,000–P20,000 debt in just a few months.
- The cap is expected to give immediate relief to low-income borrowers, daily-wage earners, and micro-entrepreneurs who rely on quick cash but often fall into debt spirals.
The rule complements the Department of Finance and Bangko Sentral ng Pilipinas’ ongoing crackdown on predatory lending apps and brings the Philippines closer to regional standards (Thailand caps small-loan rates at 25–33% annually, Indonesia at 0.4% daily).
Lenders now have until March 31, 2026 to adjust their systems and pricing models. Non-compliant entities face heavy fines, license suspension, or revocation.
For millions of Filipinos juggling holiday expenses and daily budgets, this cap isn’t just regulation — it’s real relief.