LENDING and financing companies can no longer subject their customers to exorbitant interest rates for loans at will.The Securities and Exchange Commission (SEC) has issued Memorandum Circular 3, series of 2022, capping interest rates and other fees imposed by lending and financing firms, and their online lending platforms, for short-term, small-value loans primarily targeting low-income borrowers.In a statement, the SEC said the circular provides the guidelines to implement Bangko Sentral ng Pilipinas (BSP) Circular 1133, series of 2021 on the ceilings of interest rates and other fees charged by these firms.The SEC memorandum circular took effect on Thursday, March 3.On Dec. 22, 2021, BSP Gov. Benjamin Diokno issued BSP Circular 1133 setting the maximum nominal interest rate at six percent per month, or about 0.2 percent per day, and the effective interest rate (EIR) at 15 percent per month, or about 0.5 percent per day.These are for unsecured, general-purpose loans that don’t exceed P10,000 and loan tenor of up to four months.The EIR includes the nominal interest rate and other charges, such as processing fees, service fees, notarial fees, and others, but excludes fees for late payment and non-payment.For late payment or non-payment of outstanding amounts due, lending and financing firms may not charge more than five percent per month, the SEC said.To prevent the cost of the loan from spiraling out of control, the SEC said: “A total cost cap of 100 percent of the total amount borrowed, applying to all interest, other fees and charges, and penalties, regardless of time the loan has been outstanding, will likewise be imposed.”The cap on interest rates and fees applies only to covered loans offered from March 3.Fines up to P1 millionLending companies that violate the rate limits face fines of P25,000 for the first offense and P50,000 for the second offense, while financing companies will be slapped with higher penalties of P50,000 for the first offense and P100,000 for the second offense, the SEC said.For the third offense, the penalty is P100,000 to P1 million for lending firms and P200,000 to P1 million for financing companies; the 60-day suspension of their financing and lending activities, or the revocation of their Certificates of Authority to Operate as a Financing/Lending Company.