SEC suspends registration of new online lenders
Citing an immediate need to curb “abusive” and “predatory” online lending practices, the Securities and Exchange Commission (SEC) has issued a moratorium on the registration of new online lending platforms (OLPs) of financing and lending companies.
The order dated Nov. 2 took effect immediately and was issued ahead of new rules that the SEC will impose to improve the governance of OLPs, many which it had blacklisted due to unfair debt collection practices, including shaming on social media and issuing death threats.
“We are currently crafting new guidelines that will allow lending and financing companies to better address the needs of borrowers and, at the same time, plug loopholes that give rise to abusive and predatory practices,” SEC chair Emilio Aquino said in a press statement on Friday.
Previously registered OLPs may continue to operate but even they will be subjected to strict monitoring, audit and review to ensure their compliance with all applicable laws, rules and regulations.
“We have seen the emergence of financial technology companies that engage in predatory lending, taking advantage of those struggling financially during the pandemic. The Commission will work toward stamping out these abusive financing and lending companies that do nothing but bury borrowers in even more debt,” Aquino said.
Worst recession
As the Philippine economy succumbed to its worst economic recession last year when the COVID-19 erupted, resulting in unprecedented loss of jobs, many cash-strapped consumers turned to quick-disbursing loans offered by online lenders. But some charge usurious rates and resort to abusive collection practices.
For instance, some lending mobile apps access the list and contact numbers of persons in the borrowers’ mobile phone and send text blasts shaming the borrowers when they are unable to pay. Some would even falsely claim that the recipient of the text blasts had been named by the borrower as loan guarantor.
To date, the SEC has cancelled the licenses of 35 financing/lending companies, citing various violations of applicable rules and regulations.
The SEC has also revoked the certificate of registration of a total of 2,081 lending companies for their failure to secure the requisite certificate of authority, pursuant to Republic Act No. 9474, or the Lending Company Regulation Act of 2007.
Moreover, 58 online lending applications have been ordered to cease operations for lack of authority to operate as a lending or financing company.
In 2019, the SEC required all lending and financing companies to report their OLPs and register them as business names. They were also directed to display on their advertisements and OLPs their respective corporate names, SEC registration numbers and certificate of authority numbers.
Lending and financing companies were also required to disclose to their borrowers the interest rates and all other imposable charges before the consummation of loan transactions.
