Recently, police in the provinces of Iloilo and Antique in the Philippines successfully arrested a number of foreigners engaged in illegal money-lending activities. This incident has once again raised concerns about illegal lending practices. From a legal standpoint, we must ensure that any form of lending activity is conducted in compliance with Philippine law.
First, let us be clear that Philippine law strictly regulates lending activities. Under the Civil Code of the Philippines and other relevant laws and regulations, it is an offence to engage in unauthorized lending activities.
Any person or entity engaging in the business of money lending in the Philippines must obtain the relevant licences and permits. Otherwise, their actions will be considered illegal and may be subject to severe legal penalties, including fines or imprisonment, which may range from six months to ten years.
Individuals and entities interested in engaging in the lending business are strongly advised to comply with Philippine laws and operate through legal means. The following are some of the do's and don'ts:
Obtaining legal licences and permits
Before commencing any lending business, it is necessary to register with the SEC and obtain a Certificate of Authority to Operate and licences and permits, etc. issued by the relevant Philippine agencies.
Regulatory compliance
Strict adherence to the regulations of the regulator must be observed. This includes:
✰ Developing compliant lending policies
✰ Providing clear and accurate loan terms and conditions
✰ Not misusing lenders' personal information
✰ Being open and transparent about loan rates, fees, etc.
lawful collection
During the loan process, the statutory collection procedures must be strictly adhered to in order to ensure that collection activities are carried out within the bounds of legality.
■ demand letter
The creditor may first send a demand letter to the debtor formally requesting the outstanding loan amount. This is usually the first step in the collection process.
■ Consultation and reorganisation
The creditor and the debtor may negotiate to reschedule the terms of the loan, such as extending the repayment period or modifying the interest rate.
■ Legal proceedings
If the debtor still fails to repay the loan, the creditor may file a civil suit in court.