The rapid expansion of financial technology has reshaped the way credit is offered, evaluated, released, and collected. Borrowers can now complete the entire lending cycle on a mobile phone, without visiting a physical office. While this shift has widened access to credit, it has also raised concerns involving excessive charges, misleading disclosures, unauthorized disbursements, data misuse, and abusive collection practices.

In response to those concerns, the Securities and Exchange Commission (SEC) imposed a moratorium on the establishment of new online lending platforms (OLPs) through Memorandum Circular No. 10, Series of 2021 (MC No. 10-2021). The freeze, in place for roughly five years, left the market closed to new online-only entrants while the regulator accumulated supervisory experience with platforms already operating. Following industry developments and that supervisory experience, the SEC has now issued Memorandum Circular No. 20, Series of 2026 (MC No. 20-2026), or the "Guidelines Prescribing Prudential, Disclosure, and Market Conduct Requirements for Financing and Lending Companies and Lifting the Moratorium on Online Lending Platforms," which lifted the moratorium effective Aug. 1 — but under a markedly stricter regulatory regime. The circular operates within the SEC's existing mandate over financing companies under the Financing Company Act of 1998 (Republic Act No. 8556) and lending companies under the Lending Company Regulation Act of 2007 (Republic Act No. 9474).

MC No. 20-2026 applies broadly. It governs not only companies that operate purely online but also existing, newly registered, prospective, and pending applicants seeking to engage in financing or lending via OLPs, traditional branches, or mixed channels. That reach matters for conventional lenders as well: a brick-and-mortar financing or lending company that later adds an app falls inside the same regime as an online-only operator.

Single Certificate of Authority

A key structural change is the Single Certificate of Authority Policy. Under this approach, a financing company (FC) or lending company (LC) incorporated after MC No. 20-2026's effectivity receives only one Certificate of Authority (CA) covering its principal office, branches, geographical operations, and OLPs. An OLP is treated as a distribution channel of the licensed entity rather than a separately certified business. The policy simplifies licensing but amplifies corporate accountability: violations committed through any OLP expose the parent FC or LC to administrative sanctions, monetary penalties, suspension, or revocation of its authority to operate.

Capital Tied to Platform Count

MC No. 20-2026 links the permitted number of OLPs to statutory paid-up capital. An FC must maintain paid-up capital of P20 million for one OLP, increasing by P20 million for each additional OLP, up to a maximum of five OLPs and P100 million. An LC must maintain P10 million for one OLP, increasing by P10 million for every additional OLP, likewise subject to a maximum of five OLPs and P50 million. The paid-up capital computation excludes retained earnings, revaluation surplus, additional paid-in capital, and advances. Companies must always maintain net worth at or above the applicable minimum. In effect, the tiered schedule makes balance-sheet capacity, rather than technical capability, the binding constraint on how many platforms a company may run.

An OLP is identified according to its distinct borrower-facing name, brand, application, or digital identity. Accordingly, several applications that appear to consumers as separate platforms may be counted as separate OLPs even if they share the same software, personnel, servers, or technological infrastructure. Conversely, multiple websites or systems operating under a single borrower-facing identity may be treated as one OLP. The borrower-facing-identity test speaks to an operating model that became widespread in the sector: one back office supporting several consumer-facing apps, each marketed under a different name. Under the circular, that structure now carries a direct capital cost, because every distinct brand consumes another tranche of paid-up capital and counts toward the five-platform ceiling.

FCs and LCs are prohibited from using rebranding, outsourcing, migration, fragmentation, corporate restructuring, or similar arrangements to avoid capitalization, disclosure, or supervisory requirements. In determining the responsible regulated entity, the SEC may examine the actual operations, ownership, contractual arrangements, and technological structure of a platform.

Transition Period for Existing Companies

Existing companies are granted a transition period. An FC or LC already operating one or more OLPs must comply with the corresponding capitalization requirement within 12 months from MC No. 20-2026's effectivity. Within 180 days, a company that does not intend to capitalize all its existing OLPs may retain only the number supported by its capital level. An OLP not disclosed within the prescribed period will be considered delisted and may no longer operate. The twin deadlines — 180 days to disclose, 12 months to capitalize — make the transition period the first concrete compliance test for incumbent operators, who must either fund the platforms they keep or shed the rest.

Consumer Protection at the Center

Consumer protection is central to MC No. 20-2026. Before loan confirmation, an OLP must clearly disclose the approved loan amount, the net amount to be received, monthly and effective interest rates, fees and charges, the payment schedule, the exact term, and any other material information. Borrowers must explicitly acknowledge these disclosures, and lenders must transmit complete, unaltered electronic Loan Disclosure Statements.

Loan proceeds cannot be released merely because a system has generated or approved a loan. Final terms must be presented and expressly confirmed by the borrower, with confirmations recorded, time-stamped, retrievable, and linked to the loan transaction — an auditable record of what the borrower was shown and agreed to.

Data privacy and collection practices receive similar emphasis. FCs and LCs remain accountable for activities performed by their agents and third-party service providers. Individuals listed in a borrower's contact list or references cannot be treated as guarantors, sureties, co-makers, or persons liable for the debt unless they separately and expressly agreed in writing to assume such an obligation. That rule addresses one of the complaints that prompted the tighter regime in the first place — collection messages directed at borrowers' contacts — conduct that in earlier years drew investigations and enforcement action from the National Privacy Commission. Collection communications must reasonably identify the FC, LC, or OLP making the collection.

A Continuing Regulatory Privilege

MC No. 20-2026 signals that the SEC is prepared to permit renewed growth in the online lending industry, but only within a framework of increased capitalization, transparency, accountability, and consumer protection. It transforms the right to operate an OLP into a continuing regulatory privilege dependent on the financial capacity, governance, technological safeguards, and market conduct of the licensed company. The near-term markers are fixed by the circular itself: the 180-day disclosure window, the 12-month capitalization deadline, and how the SEC applies the borrower-facing-identity test when counting platforms that share back-end infrastructure. The doors to new online lending platforms may have reopened, but entry now carries substantially greater regulatory responsibility.

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes only and is not offered as, and does not constitute, legal advice or legal opinion.

Marianne Monica G. Ignes is an Associate of the Corporate and Special Projects Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW). She may be reached at mgignes@accralaw.com or 8830-8000.