Authors:
Maria Tara Mercado
t.mercado@syp-law.com
Samantha Claire Cepeda
s.cepeda@syp-law.com
Celine Sato
c.sato@syp-law.com
On 7 July 2026, the Securities and Exchange Commission (SEC) issued Memorandum Circular No. 20, Series of 2026, entitled the “Guidelines Prescribing Prudential Disclosure and Market Conduct Requirements for Financing and Lending Companies.” The Circular represents the most significant overhaul of the Philippine regulatory framework for online lending since the SEC imposed a moratorium on new online lending platforms (OLPs) in 2021.
1. Moratorium on New OLPs Lifted
The Circular lifts and supersedes the moratorium under SEC MC No. 10, Series of 2021, effective 01 August 2026, and allows the disclosure and recording of new Online Lending Platforms owned, operated, controlled, or utilized by financing companies and lending companies. However, the lifting of the moratorium is not an automatic or unconditional approval of any OLP. All companies remain subject to the Circular’s disclosure, business plan, capitalization, operational, consumer protection, data privacy, and supervisory requirements.
2. New Regulatory Framework for All Digital Lenders
a. Single Certificate of Authority. The SEC has adopted a Single Certificate of Authority framework, whereby a single Certificate covers all financing or lending activities, including those conducted through OLPs. OLPs will not be treated as separate legal entities, branches, or independently authorized units. This streamlines licensing administration while allowing the SEC to exercise centralized oversight over a company’s digital lending operations. c. Mandatory Registration and Disclosure. All OLP Operators must register and disclose relevant information regarding each operated OLP. All OLP names used by a financing or lending company must be registered and disclosed to the SEC as business names or trade names. Each OLP name must be uniquely associated with a single financing or lending company and must not be used in a manner thatmisleads borrowers as to the identity of the company responsible for the OLP.
Financing companies and lending companies are prohibited from changing or modifying their OLP names within sixty (60) months from disclosure, unless allowed under existing rules or approved by the SEC. Any discontinuance, replacement, renaming, transfer, migration, merger, consolidation, or other modification of an OLP must also be disclosed to the SEC. These changes do not affect liabilities, borrower claims, pending complaints, investigations, enforcement actions, or regulatory proceedings relating to the OLP.
c. Increased Minimum Capitalization. One of the most notable changes is the increase in minimum paid-up capital requirements, particularly for digital lending operators. FCs or LCs are only allowed to own and operate a maximum of five (5) OLPs, subject to the following required capitalization levels:
| Number of OLPs | Financing Companies | Lending Companies |
| 0 | Php 15,000,000.00 | Php 5,000,000.00 |
| 1 | Php 20,000,000.00 | Php 10,000,000.00 |
| 2 | Php 40,000,000.00 | Php 20,000,000.00 |
| 3 | Php 60,000,000.00 | Php 30,000,000.00 |
| 4 | Php 80,000,000.00 | Php 40,000,000.00 |
| 5 | Php 100,000,000.00 | Php 50,000.000.00 |
The revised capitalization rules raise the entry barrier for digital lenders and are intended to ensure that operators have sufficient financial capacity to support responsible lending operations.
Every financing company and lending company must maintain net worth equivalent to or greater than the applicable minimum capitalization requirement under the Circular. Net worth will be determined based on the latest due audited financial statements.
d. Operational Controls for OLPs. Financing companies and lending companies may not operate an OLP unless the OLP, including any website, application, software, or platform forming part of it, has the operational features and functionalities required by the Circular. OLPs must maintain appropriate system controls, including audit logs, transaction traceability, and access controls, to ensure the integrity, security, and verifiability of borrower interactions and transactions.
d. Mandatory Truth in Lending Disclosures. The SEC aims to eliminate hidden charges and improve borrower understanding of the true cost of credit. Hence, before a loan may be approved or disbursed, OLPs must prominently disclose key loan terms, including the effective interest rate, all fees and charges, penalties, repayment schedule, and loan tenure. All FCs and LCs must use the template loan disclosure statement given by the SEC.
e. Express Borrower Consent for Disbursement. The Circular explicitly prohibits automatic loan disbursement, automatic loan renewals, and any release of funds without the borrower’s informed confirmation. Borrowers must expressly acknowledge and accept the loan terms prior to disbursement. This addresses longstanding complaints regarding “instant” loan releases and unauthorized rollovers that increase borrower indebtedness.
f. Collection Requirements. Collection communications must be fair, transparent, and not misleading. They must identify the registered name of the financing or lending company, the specific OLP or application on whose behalf the collection is being made, or other information required by the SEC. Automated, system-generated, or pre-programmed collection messages that fail to reasonably identify the company or relevant OLP are deemed unauthorized, and the borrower has the right to disregard them.
Financing companies and lending companies should review their operations for compliance with MC No. 20, particularly with respect to capitalization, OLPs, disclosures, privacy, and collection practices. Non-compliance may result in significant penalties and regulatory sanctions.
3. Impact on Borrowers
The new rules appear designed to address many of the complaints that prompted the SEC’s 2021 moratorium, including hidden charges, unauthorized loan releases, abusive collection tactics, and misuse of personal data.
a. Greater Transparency on the True Cost of Borrowing. Borrowers will receive clearer disclosures on the total cost of a loan, including interest, fees, penalties, repayment schedules, and the actual amount to be released. This allows borrowers to better understand and compare loan products before committing.
b. Protection Against Unauthorized Loans. Lenders may no longer automatically release loans or renew existing loans without the borrower’s express consent. Borrowers must actively confirm their acceptance of the loan terms before funds can be disbursed.
c. Stronger Privacy Rights. The Circular reinforces compliance with the Data Privacy Act and limits the misuse of borrower information, including contact lists. This helps protect borrowers and their contacts from harassment and unauthorized disclosures.
d. Fair Collection Practices. MC No. 20 strengthens regulatory oversight of digital lenders and promotes responsible lending and collection practices. Borrowers should benefit from greater protection against abusive and unfair collection methods.
e. Easier Verification of Legitimate Lenders. Online lending platforms must be registered and disclosed to the SEC, making it easier for borrowers to identify legitimate and regulated lenders. This reduces the risk of dealing with illegal lending applications.
f. More Reliable Lending Providers. Higher capitalization and compliance requirements are expected to promote a more stable and accountable digital lending industry. Borrowers may benefit from dealing with better-capitalized and more closely supervised lenders.
g. Increased Access to Regulated Digital Credit. With the lifting of the moratorium on new online lending platforms, borrowers may have access to more digital lending options. At the same time, the SEC’s enhanced safeguards seek to ensure that increased access is accompanied by stronger consumer protection.
SEC MC No. 20, Series of 2026 marks a significant shift in the regulation of financing companies, lending companies, and digital lending operations. While it lifts the prior moratorium on OLPs, it also imposes a more comprehensive regulatory framework covering capitalization, OLP disclosure, business planning, borrower disclosures, data privacy, credit information, marketing, collection practices, and anti-circumvention. Companies operating in this space should treat the Circular not merely as a reopening of the OLP market, but as a stricter compliance framework for responsible digital lending.
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