SEC Chairman Lilia R. Bautista said a mere 269 out of the total 10,885 registered lending investors have complied with the SEC order and have been granted licenses to operate as financing companies.
Two years ago, the lending investors were given until July last year to convert into financing companies or face sanctions from the SEC.
But the lending firms have been delaying compliance with the SEC’s directive since this would entail additional capital. Those operating in Metro Manila will have to raise their capitalization to P10 million while those in the provinces should have at least P2.5 million in capital.
With the introduction of the Lending Company Regulation Act in Congress, lending firms found more reason not to rush into converting as financing companies since once the bill is signed into law, lending investors will fall under the jurisdiction of the Department of Trade and Industry.
The bill will lay down the minimum requirements and standards for the creation of lending firms.
Under the proposed measure, lending corporations shall register as a corporation and file with the DTI a schedule of liabilities and its list of debtors as well as other reports that the DTI may require.
The proposed bill also provides stiffer penalties for erring lending firms. Violators would be fined not less than P10,000, or maximum imprisonment of 10 years, both at the discretion of the courts.
A group of lending investors earlier urged the SEC to temporarily hold the implementation of its directive as this would result in the extinction of small lending firms.
The group said that requiring lending investors to convert to financing companies is against the nature of micro-lending which is to remain small in order to cater to small borrowers denied credit by banks and bigger lenders.
But the SEC said that while it recognizes the role of micro-finance in the fight against poverty, it could not close its eyes to the dangers of thousands of unregulated lending investors who are deriving their funding requirements from the investing public.
The SEC has been receiving reports that several lending and financing companies have gone beyond their required business activity by soliciting funds from the public with the promise of high yielding returns.