MANILA, Philippines — The Securities and Exchange Commission (SEC) has issued the draft guidelines for the registration and operation of online lending platforms (OLPs), as part of efforts to weed out abusive companies, including those who shame borrowers on social media and those unauthorized to lend to the public.
Under the proposed guidelines, OLPs must be registered and must have a detailed business plan. They must not practice abusive collection or lending methods.
“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 said.
The guidelines, which have been released for public comment, come after the SEC issued a moratorium on the registration of new OLPs early this month.
Lending companies must also illustrate their ability to engage in fintech and that it must be included in their purpose, as stated in ther Articles of Incorporation.
Existing and newly registered financing and lending companies will be covered by the new guidelines.
Those who have yet to own, operate or utilize OLPs and other modes of financial technology, as well as those who are already engaged in fintech who look to provide their credit products and related services, will also be covered.
Applicants 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.
Furthermore, applicants must submit their detailed business and operational plan to the SEC containing the company’s compliance with Republic Act 3765 or the Truth in Lending Act (TILA), and SEC Memorandum Circular 19 on the Disclosure Requirements on Advertisements of Financing Companies and Lending Companies and Reporting of Online Lending Platforms.
The financing or lending company will likewise provide a walk-through of the OLP, simulating actual user experience, its complaint-handling process, and a discussion on the extent of data to be collected by the OLP, and how they will be handled.
Under the draft guidelines, the OLP license shall have an initial validity of one year from the issuance date, subject to periodical examination and renewal by the SEC.
The validity of the license will depend on the financing or lending company’s compliance with reportorial requirements and no violations of TILA, SEC MC 18, SEC MC 19, and other reportorial requirements for the immediately preceding year, among others.
Financing and lending companies who have been granted OLP licenses should report any change or termination of the OLP to the SEC not less than 10 days before implementing such change or termination.
Those with existing OLPs who wish to develop, own, operate or utilize additional OLPs shall apply anew.
Financing companies which fail to comply with the conditions of the OLP license will be subject to penalties ranging from P100,000 for the first offense and P200,000 for the second offense, to no more than P1 million for the third offense and possible suspension.
Depending on the gravity of the offense, the SEC may proceed with the suspension or revocation of the company’s Certificate of Authority to Operate as a financing or lending company and primary license, the SEC said.
If the number of OLP applicants may be too many, the SEC may, at its discretion, set a limit on the total number of OLPs that may be established, taking into consideration the effects on the industry and the general public.