Digital lending in the Philippines has grown exponentially in recent years, presenting unprecedented opportunities for financial inclusion while simultaneously introducing complex, systemic risks for financial consumers. Recognizing the need to promote responsible technological innovation while safeguarding market integrity, the Securities and Exchange Commission (SEC) has issued a landmark regulation for Financing Companies (FCs )and Lending Companies (LCs) that currently offer or intend to offer financing or lending products and services through Online Lending Platforms (OLPs), traditional lending channels, brick-and-mortar operations, or any combination thereof. This development signals a transition from an outright regulatory restriction to a highly structured, prudential, and consumer-centric governance framework, marking a significant milestone for financing and lending companies in the digital space.
Through SEC Memorandum Circular No. 20, Series of 2026 (the “Circular”), signed by SEC Chairperson Francisco Ed. Lim, the Commission has lifted and superseded the moratorium on the recording of new OLPs originally imposed under SEC Memorandum Circular No. 10, Series of 2021, effective August 1, 2026.
The SEC Circular applies to all FCs and LCs—including existing, newly registered, or those with pending applications for registration—that currently offer or intend to offer financing or lending products through OLPs, traditional lending channels, or brick-and-mortar operations. Formulated pursuant to the Revised Corporation Code, the Financing Company Act (FCA), the Lending Company Regulation Act (LCRA), the Financial Products and Services Consumer Protection Act (FCPA), and the Truth in Lending Act (TILA), this Circular introduces stringent licensing, capitalization, net worth, and market conduct requirements to ensure that digital lending operates under stable and transparent conditions.
This Circular does not apply to purely internal administrative, accounting, treasury, human resources, or infrastructure technologies that do not directly impact lending activities.
The SEC Circular establishes a multi-tiered regulatory and prudential system designed to align digital operations with market integrity. Below are the core pillars of the new guidelines:
- Single Certificate of Authority (CA) Policy: Each FC or LC incorporated after the effectivity of this Circular shall be issued only one (1) CA. This single license covers all financing or lending activities of the corporation, regardless of the number of its branches or geographical location. No separate CA shall be issued for OLP. OLPs are not treated as separate legal entities, branches or independently authorized units but are strictly classified as operational channels of the parent company. Similarly, no separate CA shall be required or issued for the establishment, operation, relocation, or maintenance of a Branch Office.
However, FCs and LGs shall notify the Commission prior to the establishment, operation, closure, relocation, or material changes relating to its Branch Offices. Furthermore, agencies extension offices, units, satellite offices, service centers, customers assistance centers, collection centers, and similar operational arrangements established or maintained by an FC or LC that do not otherwise fall within the definition of a Branch Office shall likewise be disclosed to the Commission prior to establishment or operation, in such form and manner as may be prescribed by the Commission.
All existing FCs or LCs have eighty (80) days from the effectivity of the Circular to disclose all existing and operating branch offices to the Commission.
- Registration and Lock-in Period for OLP Names: All OLP names used by an FC or LC must be registered with and disclosed to the Commission. Each OLP name must be uniquely associated with a single company to avoid misleading borrowers. Likewise, the discontinuance, replacement, renaming, transfer, migration, merger, consolidation, or other modification of an OLP shall be disclosed in such form and manner as may be prescribed by the Commission. Crucially, the Circular establishes a sixty (60) month (5 years) lock-in period from the date of disclosure, during which companies are prohibited from changing or modifying their OLP names unless specifically authorized by the SEC.
- Baseline Minimum Paid-Up Capital Requirements: All FCs or LCs incorporated after the effectivity of the Circular must, as a condition for the issuance of a CA, meet the following baseline minimum paid-up capital levels, which apply uniformly nationwide, regardless of location:
- Financing Companies (FCs): ₱15,000,000.00
- Lending Companies (LCs): ₱5,000,000.00
- Scale-Commensurate OLP Capitalization Requirements: To regulate platform-related risks, the Circular sets a strict cap of five (5) OLPs per company. Furthermore, companies operating OLPs must maintain minimum paid-up capital commensurate with the scale of their digital operations.
- Minimum Net Worth Requirement: To ensure continuous financial resilience, every FC and LC must, at all times, maintain a Net Worth equivalent to or greater than the applicable minimum capitalization required under their respective operational scale. The minimum paid-up capital required for each OLP is PHP 20 million for FCs and PHP 10 million for LCs.
- New Entity-Level Annual Licensing Fees (ALF): The Circular replaces the traditional branch-level fees with a streamlined entity-level ALF. Imposed starting 01 January 2027 (payable on or before 31 December 2027, and annually thereafter), the ALF is computed based on the total assets reflected in the company’s latest audited financial statements, using the following graduated scales:
- For Financing Companies (FCs):
- Not exceeding ₱75,000,000.00: Fixed amount of ₱3,000.00
- Greater than ₱75,000,000.00 but not exceeding ₱500,000,000.00: 0.004%
- Greater than ₱500,000,000.00 but not exceeding ₱1,500,000,000.00: 0.006%
- Greater than ₱1,500,000,000.00 but not exceeding ₱3,000,000,000.00: 0.008%
- Greater than ₱3,000,000,000.00: 0.01% (capped at ₱300,000.00)
- For Lending Companies (LCs):
- Not exceeding ₱65,000,000.00: Fixed amount of ₱2,000.00
- Greater than ₱65,000,000.00 but not over ₱500,000,000.00: 0.003%
- Greater than ₱500,000,000.00 but not exceeding ₱1,000,000,000.00: 0.004%
- Greater than ₱1,000,000,000.00 but not over ₱2,500,000,000.00: 0.006%
- Greater than ₱2,500,000,000.00: 0.008% (capped at ₱200,000.00)
- Business Plan Requirements: New companies that will be incorporated as FCs or LCs subsequent to the effectivity of this Circular shall submit the business plan within sixty (60) days from the date of issuance of its CA to Operate as an FC or LC.
- Establishing an OLP: All FCs and LCs operating an OLP shall disclose and maintain accurate and updated information regarding each OLP, including its name borrower-facing identity, website, mobile application, domain names, platform links, and such other information as may be required by the Commission.
- Operational Requirements: FCs and LCs shall not operate or allow the operation of an OLP unless such OLP, including any website, application, software, or platform forming part thereof, possesses the operational features and functionalities as required in this Circular. OLPs shall maintain appropriate system controls, including audit logs, transaction traceability, and access controls, sufficient to ensure the integrity, security, and verifiability of all borrower interactions and transactions.
- Rigorous Market Conduct and Consumer Protection Safeguards: To address operational abuses, the SEC has established strict, non-negotiable operational requirements for digital platforms:
- TILA Disclosures: Upon OLP opening, or prior to loan confirmation, companies must clearly, prominently, and comprehensibly disclose the true cost of credit (including loan amount, monthly interest rate, effective interest rate, all fees, payment schedule, and exact term) using the prescribed Loan Disclosure Statement and obtain explicit, affirmative borrower acknowledgment.
- No Auto-Renewals or Unauthorized Disbursements: No disbursement of loan proceeds is allowed without explicit, informed confirmation of final loan terms by the borrower.
- Data Privacy and Security: FCs and LCs must ensure strict compliance with the Data Privacy Act (DPA) of 2012, its IRR, and National Privacy Commission (NPC) circulars. Secure storage (Data Servers) and encryption of personal data are mandatory.
- Fair Debt Collection Practices: All collection communications, whether handled internally or through Third-Party Service Providers (TPSPs), must be transparent and fair. Contacting character references or contacting individuals in the borrower’s contact list is strictly prohibited unless they have expressly agreed in writing as co-makers or guarantors.
- CIC Registration: Mandatory registration and submission of credit data information to the Credit Information Corporation (CIC) in accordance with the Credit Information System Act (CISA).
For legal practitioners, compliance officers, and fintech executives, the issuance of SEC MC No. 20, Series of 2026 demands immediate corporate and operational adjustments:
- Capital Adjustments and OLP Auditing: Existing FCs and LCs operating OLPs have a twelve (12) month transition period from the effectivity of the Circular to comply with the minimum paid-up capital requirements corresponding to their active OLPs. Within one hundred eighty (180) days from effectivity, companies must disclose all active OLPs and either reduce their platform portfolio to match their current capital level or face automatic delisting.
- Branch Office Reporting: Existing physical branch offices must be disclosed and recorded with the Commission within one hundred eighty (180) days. Furthermore, any physical expansion (e.g., opening a new physical branch) triggers the immediate obligation to meet the baseline minimum capitalization (₱15M for FCs, ₱5M for LCs).
- Name Stability & Long-term Brand Value: The strict 60-month lock-in period for OLP names requires legal and marketing teams to coordinate extensively before launching any brand. A name change or rebranding during this period is prohibited except under exceptional, pre-approved circumstances.
- Overhaul of Operational Documentation: All client-facing interfaces, automated loan agreement processes, terms of service, and scripts used by collection agents must be reviewed to ensure alignment with TILA, DPA, and NPC rules. Strict penalties, including the suspension or revocation of the CA, apply to violations like non-disclosure of fees or unauthorized contact of character references.
- Severability of Violations: Under Section 27, penalties are cumulative and apply per count of violation. Late or non-submission of business plans, failure to maintain net worth, or marketing infractions carry severe fines and risks of license suspension, making compliance a board-level oversight item.
SEC Memorandum Circular No. 20, Series of 2026, marks a significant shift in the Philippine digital lending market. By lifting the 2021 moratorium and replacing it with a targeted regulatory framework, the SEC aims to expand financial access while protecting Filipino borrowers. This approach ensures that expanding digital credit does not undermine market stability, transparency, or consumer trust. Although it raises the compliance bar for lending firms, the new guidelines/rules will help build a more sustainable and mature credit market.
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Mary Grace L. Villanueva is an associate at GVES Law.