(The brief history and lack of regulation of the lending business is discussed in Part 1; see also Establishing a Lending Company.)

 

DTI as the supervising agency

It is therefore an immediate concern for us and to the financial system to provide a regulatory framework to an important industry.

Consumer protection is one if not the foremost concern in this regard. 
 
Lending companies are in the business of providing credit to the public who are in critical need of finances but are unable to obtain credit from banks and other more established financial institutions.

Unfortunately, these consumers who avail of credit from lending companies are common prey to those who exercise anti-consumer practices apd charge unconscionable interest rates.

For the! protection of the public, therefore, we need to establish a consumer protection program under the umbrella of the Department of Trade and Industry (DTI), which the Bangko Sentral has recommended to be the overseer because it has the capacity to regulate the industry considering the widespread distribution of its offices throughout the country.

Hence, it is our proposal that the DTI be empowered to issue rules and regulations for the operations of lending investors. The books, records an other aspects of the operations of these companies will be subject to evaluation by the DTI to ensure that the borrowing public is not abused.

The DTI shall likewise ensure that existing related laws, such as the Truth in Lending Act and the Consumer Act, will be complied with.

Incorporation of lending investors

To further enhance the regulation of lending investors and protect the investing public, they will be required to incorporate. However, the capitalization requirement will be made lower at P1,000,000, compared to the PI0 million required by the Financing Company Act.

Charges on loans

To ensure that the borrowers are not unfairly overburdened with exorbitant interest rates, charges on loans will be monitored and maintained at a reasonable level. The Monetary Board will be tasked to consult with the DTI and the industry and will be given the authority to prescribe such rates as may be warranted by prevailing and economic social conditions.

Imposition on penalties

Abuses and violations of the laws and regulations will be meted out with the corresponding administrative sanctions of suspension or revocation of licenses, including imprisonment of up to ten years for serious offenses.

(The foregoing is from the explanatory notes of Senate Bill No. 1180, which was sponsored by Senator Ramon Magsaysay, Jr., and Senator Edgardo Angara's sponsorship speech for Senate Bill No. 1949. These bills were filed during the 13th Congress, but were not passed by Congress. A new law was subsequently passed -- read Establishing a Lending Company.)