The Securities and Exchange Commission (SEC) seeks to purge the online lending sector of abusive and predatory practices through stringent selection of firms applying for a license.
After imposing a moratorium on the licensing of new online lending platforms (OLPs), the regulator is proposing a framework that will apply to both existing and newly registered financing and lending companies that have yet to own, operate or utilize OLPs and other modes of financial technology (fintech). It will also cover fintech companies that plan to offer credit and related services.
The SEC released the draft guidelines on Friday for public comment, giving interested parties until Dec. 3 to submit their inputs.
Under the proposed guidelines, no financing or lending company will be allowed to own, operate, or use OLPs, or engage in fintech without registration and prior approval by the SEC. The corporate regulator may, at its discretion, set a limit on the total number of OLPs that may be established.
The company’s ability to engage in fintech must also be included in its purpose as stated in its articles of incorporation.
The names of the OLPs must be registered as business or trade names of the financing or lending company pursuant to amended guidelines and procedures on the use of corporate and partnership names.
Aside from being duly registered and licensed as financing or lending companies, applicants for OLP license must also have at least five directors and at least two independent directors, or such number that that will constitute 20 percent of the members of the board of directors, whichever is higher.
The applicant will be required to submit documents, including a detailed business and operational plan containing the company’s compliance with various laws protecting consumers against unfair and inaccurate billings and other charges. Under the draft guidelines, an OLP license will have an initial validity of one year from the issuance date, and will be subject to periodical examination and renewal.
Financing companies that fail to comply with the conditions of the license will be fined P100,000 for the first offense and P200,000 for the second offense. Similarly, lending companies will be subject to penalties of P50,000 and P100,000 for the first and second offenses, respectively.
For the third offense, the SEC may impose a fine of at least twice the basic penalty but not more than P1 million. Suspension and revocation of license may be implemented, as appropriate. INQ