SEC readies rules that lift moratorium on online lending platforms
MANILA, Philippines — The Securities and Exchange Commission (SEC) has released for public comment a draft memorandum circular that would lift the moratorium on online lending platforms (OLPs). This, while introducing tighter prudential, disclosure, and market conduct requirements for financing and lending companies.
In a notice dated March 11, the SEC said the proposed guidelines seek to modernize oversight of digital lending activities and strengthen consumer protection.
The draft issuance would formally lift and supersede SEC Memorandum Circular No. 10, Series of 2021. This imposed a moratorium on the recording of new online lending platforms.
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Once adopted, financing companies and lending companies may again disclose and operate OLPs, subject to enhanced regulatory safeguards.
The SEC said the proposal is anchored on its regulatory authority under the Financing Company Act of 1998 and the Lending Company Regulation Act of 2007, as well as its consumer-protection mandate under the Financial Products and Services Consumer Protection Act.
Among the key provisions in the draft circular is the adoption of a Single Certificate of Authority Policy. Each financing or lending company will be issued only one certificate of authority covering its principal office and all branch offices. Separate certificates for individual branches will no longer be issued.
The SEC also proposes that all existing and proposed branch offices be declared in the company’s business plan or amended business plan submitted to the commission. Any opening, relocation, closure or suspension of a branch would be treated as a material amendment requiring regulatory approval or reporting.
Revised licensing-free framework
The draft circular also introduces a revised annual licensing fee framework based on the company’s total assets as reflected in its latest audited financial statements.
The proposal would remove branch-level licensing fees, adopt an entity-level licensing structure, and standardize the payment deadline to Dec. 31 each year, with the new rates taking effect Jan. 1, 2027.
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Another feature of the proposal is the requirement for companies to submit a pre-disclosure classification declaration before launching any digital platform.
The SEC will determine whether the platform qualifies as an online lending platform based on whether it performs core lending or financing functions.
The draft rules likewise set minimum paid-up capital requirements for financing and lending companies, including those that plan to operate OLPs. The capital requirement would be linked to the number of online lending platforms operated by a company.
Transition period
Existing firms will be given a three-year transition period to comply with the revised capital requirements. They will also be required to submit a capital compliance plan within 60 days from the circular’s effectivity.
Entities that fail to meet the requirements after the transition period may be required to stop onboarding new borrowers through excess online lending platforms and submit a discontinuance plan to ensure proper servicing of existing loans.
To strengthen consumer safeguards, the draft circular also prescribes minimum operational and consumer protection standards. These include standardized disclosures under the Truth in Lending Act, protections for borrower data privacy and restrictions against unauthorized or automated loan disbursements without borrower confirmation.
Financing and lending companies operating OLPs would also be required to register with the Credit Information Corp. (CIC), submit borrower credit data, and access CIC credit information as part of their underwriting process.
The proposed circular also includes anti-circumvention measures, such as rules addressing the rebranding or fragmentation of digital lending platforms to avoid regulatory requirements.
