Citing an immediate need to tackle “abusive” and “predatory” online lending practices, the Securities and Exchange Commission (SEC) has declared a moratorium on the registration of new online lending platforms (PLOs) of credit companies. financing and loan.
The order dated November 2 took effect immediately and was issued ahead of new rules the SEC will impose to improve the governance of PLOs, many of which had been blacklisted due to unfair debt collection practices, including shame on social media and issuing death threats.
“We are currently developing new guidelines that will allow loan and finance companies to better meet the needs of borrowers and, at the same time, close the loopholes that give rise to abusive and predatory practices,” said the president of the SEC, Emilio Aquino, in a press release on Friday.
Previously registered PLOs can continue to operate, but even they will be subject to strict monitoring, audit and review to ensure compliance with all applicable laws, rules and regulations.
“We have seen the emergence of fintech companies that engage in predatory lending, taking advantage of those in financial difficulty during the pandemic. The Commission will work to root out those abusive finance and loan companies that only bury borrowers in even more debt, ”Aquino said.
As the Philippine economy succumbed to its worst economic recession last year when COVID-19 erupted, leading to unprecedented job losses, many cash-strapped consumers turned to cash-out loans fast offered by online lenders. But some practice usurious rates and resort to abusive collection practices.
For example, some mobile loan apps access the list and contact numbers of people on the borrowers’ mobile phones and send text messages to shame borrowers when they are unable to pay. Some would even falsely claim that the recipient of the text bursts had been appointed by the borrower as the guarantor of the loan.
To date, the SEC has revoked the licenses of 35 finance / loan companies, citing various violations of applicable rules and regulations.
The SEC also revoked the certificate of registration of a total of 2,081 loan companies for their failure to obtain the required certificate of authority, pursuant to Republic Law No. 9474 or the 2007 Law of regulation of loan companies.
In addition, 58 online loan applications were ordered to cease their activities for lack of authorization to operate as a loan or finance company.
In 2019, the SEC required all loan and finance companies to report their PLOs and register them as business names. They were also required to display on their advertisements and PLOs their respective company names, SEC registration numbers, and certificate of authority numbers.
Loan and finance companies were also required to disclose interest rates and any other taxable charges to their borrowers before the completion of loan transactions.
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