THE Credit Information Corp. (CIC) announced its support for the introduction of a cap on interest rates and other fees for specific loans offered by loan companies (LCs), finance companies (FCs) and their payment platforms. online loan (OLP).
CIC said in a statement on Monday that the cap on interest rates and other charges will protect the welfare of borrowers against unsustainable interest rates resulting from excessive hedging and risk provisioning during the pandemic.
CIC President and CEO Ben Joshua A. Baltazar also said the cap on interest rates and fees should also improve access to credit.
“For now, putting a cap on interest rates and other fees for these low-value loans will help borrowers manage their repayment schedule and maintain a healthy credit history during this critical time. economic recovery,” Baltazar said. “In the meantime, continued improvements to the CIC database will provide lenders with better information for their credit ‘decision’ and risk management activities, leading to lower overall cost of credit. »
Baltazar, who is also a lawyer, added that capping interest rates and fees, especially for loan companies, finance companies and their PLOs, will also help break the negative stigma surrounding credit.
“One of our goals at CIC is to educate the public about credit as an important financial tool,” Baltazar said. “Specifically, we aim to correct the stigma associated with credit that is synonymous with financial hardship, mismanagement and vulnerability, which should not be the case.”
The Bangko Sentral ng Pilipinas (BSP) originally issued prescribed caps on interest rates and other charges for specific loans offered by LCs, CFs and PLOs, through its Circular Memorandum 1133 (2021 series ).
Loans covered by the caps are general purpose unsecured loans that do not exceed the amount of P10,000 and the loan term of up to four months.
Additionally, earlier this month, the Securities and Exchange Commission issued Circular Memorandum 03 (2022 series) implementing the central bank’s prescribed interest rate cap on LCs, CFs and PLOs. .
According to the 2019 Financial Inclusion Survey published by BSP, of the 33% of adults with outstanding loans, half applied for loans from informal sources such as informal lenders (54%) and the family and friends (41%).