A newly created association of online lenders came up with a new code of conduct that aims to institutionalize best practices and global standards of behavior for the sector that has come under scrutiny among regulators.
The new group called Lenders Alliance Inc. vowed to listen to the plight of their customers and improve customer services.
The new code of conduct will address several issues that some Filipinos have taken against online lending firms, said Michael Bréjean, a representative of the alliance.
In a press statement on Friday, Bréjean said online firms agreed to consolidate their ranks to address complaints filed by some individuals at the Securities and Exchange Commission (SEC) and the National Privacy Commission. Complaints were mostly related to illegal mining of borrowers’ mobile phone data alongside abusive collection practices like harassment and public shaming.
Bréjean appealed for understanding, noting that the industry was still in its infancy stage. Though noncollateralized lending has been in existence in the country for decades now, internet and mobile phones have allowed this industry to boom in recent years.
The internet only serves as a marketing platform so that firms may be able to reach more people in a short time, said Bréjean.
“A lot of companies would use personal information for shady purposes. These practices are unsustainable and illegal. The alliance only groups people who respect the law and their customers. The alliance is a label of trust. It means we are independently checked, you can trust us,” he said.
The founding members of Lenders Alliance are: Royal Yohoo Lending Investors Corp. (Happy Pera); KingABC Lending Corp. (Pondo Loan); Fcash Global Lending Inc. (FastCash) and U-peso.PH Lending Corp. (UPESO). Some of these firms have themselves faced complaints from borrowers.
He said noncollateralized lending existed in the country because budding entrepreneurs and owners of small and medium-sized enterprises (SMEs) needed loan facilities that did not require assets as collaterals. These are the entities that do not qualify to borrow from banks.
Unlike banks, which mitigate their risk by accepting collateral, Bréjean said noncollateralized lending firms were assuming greater risks than banks just to satisfy the needs of a growing SME market.
“We are effectively helping entrepreneurs and small and medium-sized enterprises for decades now. I have been listening to what the Filipinos think and it’s not different than France or Europe. We respond to their legitimate complaints by creating a code of conduct that would govern our sector,” he said.
“Shaming people to get them repay is intolerable. Actions had to be taken,” he added.
The code of conduct is seen to be the best solution to address issues such as character shaming.
“There are better ways to get people to repay their loans. Creating trust and pushing the idea of partnerships is the best, and it doesn’t require involving relatives or third parties. Every Filipino that trusts us and succeeds is a success for the alliance,” Bréjean said.
“This code of conduct would standardize how we manage customers and their complaints. It would likewise implement ways on debt collection. I want to reach the French and European standards of protection and trust for the industry in the Philippines,” he added.
SMEs form the backbone of the Philippine economy. However, most of these SMEs rely on noncollateralized loans to drive their business.