LIBRT: Online lending should be regulated by the Bangko Sentral ng Pilipinas

Governing Laws:

 Lending Act: Sec. 2. Declaration of Policy – It is hereby declared to be the policy of the State to
protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full
disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of
the national economy.

 RA 11211, SECTION 2. Creation of the Bangko Sentral. — There is hereby established an

independent central monetary authority, which shall be a body corporate known as the Bangko
Sentral ng Pilipinas, hereafter referred to as the Bangko Sentral.

 RA 11211, SECTION 3. Responsibility and Primary Objective. — The Bangko Sentral shall
provide policy directions in the areas of money, banking, and credit. It shall have supervision over
the operations of banks and exercise such regulatory and examination powers as provided in this
Act and other pertinent laws over the quasi-banking operations of non-bank financial institutions.
As may be determined by the Monetary Board, it shall likewise exercise regulatory and
examination powers over money service businesses, credit granting businesses, and payment
system operators. The Monetary Board is hereby empowered to authorize entities or persons to
engage in money service businesses.

The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced
and sustainable growth of the economy and employment. It shall also promote and maintain
monetary stability and the convertibility of the peso.

The Bangko Sentral shall promote financial stability and closely work with the National
Government, including, but not limited to, the Department of Finance, Securities and Exchange
Commission, the Insurance Commission, and the Philippine Deposit Insurance Corporation.

The Bangko Sentral shall oversee the payment and settlement systems in the Philippines,
including critical financial market infrastructures, in order to promote sound and prudent practices
consistent with the maintenance of financial stability.

In the attainment of its objectives, the Bangko Sentral shall promote broad and convenient access
to high quality financial services and consider the interest of the general public.

 REPUBLIC ACT No. 9474, SEC. 11. Delineation of Authority between SEC and the
BSP. - Lending companies shall be under the supervision and regulation of the
SEC: Provided, however, That lending companies which are subsidiaries and affiliates of
banks and quasi-banks shall be subject to BSP supervision and examination in accordance
with Republic Act No. 7653: Provider further, That the Monetary Board, after being satisfied
that there is reasonable ground to believe that a lending company is being used as a conduit
by a bank, quasi-bank or their subsidiary/affiliate to circumvent or violate BSP rules and
regulations, may order an examination of the lending company's books and accounts.

 SEC said the apps violated Section 4 of Republic Act 9474, or the Lending Company Regulation
Act of 2007, which requires a lending company to be established as a. It further provides that “no
lending company shall conduct business unless granted an authority to operate by the SEC.”

 REPUBLIC ACT NO. 7653, SEC. 25. Supervision and Examination. _ The Bangko Sentral shall have
supervision over, and conduct periodic or special examinations of, banking institutions and
quasi-banks, including their subsidiaries and affiliates engaged in allied activities. For purposes
 of this section, a subsidiary means a corporation more than fifty percent (50%) of the voting
stock of which is owned by a bank or quasi-bank and an affiliate means a corporation the voting
stock of which, to the extent of fifty percent (50%) or less, is owned by a bank or quasi-bank or
which is related or linked to such institution or intermediary through common stockholders or
such other factors as may be determined by the Monetary Board.

 SEC is hereby authorized to:

(a) Create a new division or bureau within its control to regulate and supervise the
operations and activities of lending companies in the country;
(b) Issue rules and regulations to implement the provisions contained herein;
(c) Issue rules and regulations on, among other things, minimum capitalization, uses of funds
received, method of marketing and distribution, maturity of funds received, restrictions or
outright prohibition of purchases or sales of receivables with or without recourse basis;
(d) Require from lending companies reports of condition and such other reports necessary to
determine compliance with the provisions of this Act;
(e) Exercise visitorial powers whenever deemed necessary; and
(f) Impose such administrative sanctions including suspension or revocation of the lending
company's authority to operate and the imposition of fines for violations of this Act and
regulations issued by the SEC in pursuance thereto.

 Lending Company shall refer to a corporation engaged in granting loans from its own capital
funds or from funds sourced from not more than nineteen (19) persons. It shall not be
deemed to include banking institutions, investment houses, savings and loan associations,
financing companies, pawnshops, insurance companies, cooperatives and other credit
institutions already regulated by law. The term shall be synonymous with lending investors.

Jurisprudence:

 In order that obligations arising from contracts may have the force of law between the parties,
there must be mutuality between the parties based on their essential equality. A contract
containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will
of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555).

 Hence, even assuming that the P1.8 million loan agreement between the PNB and the private
respondent gave the PNB a license (although in fact there was none) to increase the interest rate
at will during the term of the loan, that license would have been null and void for being violative of
the principle of mutuality essential in contracts. It would have invested the loan agreement with
the character of a contract of adhesion, where the parties do not bargain on equal footing, the
weaker party's (the debtor) participation being reduced to the alternative "to take it or leave it"
(Qua vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the
weaker party whom the courts of justice must protect against abuse and imposition.

 Banks gets authorization to the BSP, lending companies must be a corporation and must obtain a
secondary certificate to operate as a lending company in SEC.

 Limit to 200,000 US dollars.