House Ways and Means committee chairman and Albay Rep. Joey Sarte Salceda has asked Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno and the Monetary Board to regulate the interest rates of applications that offer short-term loans.
Salceda stressed that such short-term loans carried “onerous rates” and can be considered as potential risks to the country’s financial strength.
“We are alarmed at the rates of interest charged by some of these companies – with some charging as high as 1% interest per day, with one-month tenures. We are also alarmed at the potential consequences of excess subprime credit in the economy, especially since these companies are not bound by the same prudential standards that banks abide by,” Salceda wrote Diokno.
“In this regard, as co-chair of the House Defeat COVID-19 Committee (DCC) – Economic Stimulus and Recovery Cluster, I would like to appeal to the BSP and the Monetary Board to issue a cap on interest rates similar to the one imposed by the BSP on credit card loans. I understand that Section 7 of Republic Act No. 9474, or the Lending Company Regulation Act of 2007, authorizes the Monetary Board, in consultation with the industry, to prescribe such interest rates as may be warranted by prevailing economic and social conditions,” Salceda requested.
“The BSP’s recent move to regulate credit card interest rates was very welcome. However, fewer Filipinos use credit cards than payday loan apps,” Salceda said.
Salceda cited that “according to the BSP’s National Baseline Survey on Financial Inclusion, conducted in 2014 to 2015, banks were the source of only 4.4% of borrowings of average Filipinos, whereas lending and financing companies accounted for 12% of borrowings.
“This number could only have risen, as non-bank lending and financing activities have entered into the digital space, with easy-access applications on smartphones,” the solon pointed out.
Salceda also suggested that the BSP invoke Section 5 of Republic Act No. 8556, or the Financing Company Act of 1998, which empowers the Monetary Board, in consultation with financing companies and the SEC, to prescribe the maximum rate or rates of charges of financing companies.