SEC drafts registration rules for online lenders
The Securities and Exchange Commission (SEC) has released its draft guidelines for the registration and operation of online lending platforms (OLPs).
In an emailed statement on Friday, the SEC said the proposed rules for existing and newly registered finance and loan companies seek to end “abusive and predatory practices.”
“The proposed guidelines will apply to existing and newly registered finance and lending companies that have not yet owned, operated or used PLOs and other modes of financial technology (fintech), as well as those that are already engaged in fintech seeking to provide their credit products and related services,” the SEC said.
Once the circular memorandum is deemed effective, companies with existing PLOs are required to comply with the new guidelines within 180 days.
They must apply for a new OLP license under the new set of requirements, which includes amended Articles of Incorporation. Otherwise, they will not be allowed to operate their PLOs.
“The SEC may, in its discretion, set a limit on the total number of PLOs that may be established. The commission will take into consideration the total number of applications received, the PLOs already in existence and its effects on the industry and the general public,” the commission said.
Under the new guidelines, finance and lending companies will not be permitted to operate or use PLOs or offer fintech services that are not registered or approved by the SEC.
“The company’s ability to engage in fintech must also be included in its purpose, as stated in its bylaws,” the commission said.
PLOs will also be required to register as the business or trade names of the finance or loan company, as set forth in SEC Memorandum Circular No. 13, Series of 2019.
Applicants for an OLP license must have at least five directors and at least two independent directors. The SEC has said that at least 20% of its board should be made up of independent directors, or whichever is greater.
Applicants are required to provide a detailed business and operational plan consistent with Republic Act No. 3765 or the Truth in Lending Act (TILA) and SEC Memorandum Circular No. 19 , 2019 series, detailing funding and lending disclosure requirements. companies and declaration of ALPs.
An SEC panel will discuss with the applicant their business plans, as well as their marketing strategy, target market, interest rates, loan products and services.
The SEC said the finance or loan company applying for a license must also provide an overview of its user interface, discuss how it will handle complaints, and how it will handle data it collects through the ‘PLO.
Applicants must also comply with the SEC Memorandum Prohibiting Unfair Debt Collection Practices or the Credit Reporting System Act. It must also provide official email addresses and mobile phone numbers for its dealings with the commission.
“The SEC’s Corporate Governance and Finance Department (CGFD) will then evaluate the filings submitted by the applicant company,” the commission said.
A recommendation on whether to grant or deny an entity’s PLO request will be submitted to the Commission en banc for its final decision. The SEC said those who were rejected can reapply after one year, with adjustments showing that “the reason for the rejection no longer exists.”
“Under the draft guidelines, the OLP license will have an initial validity of one year from the date of issuance, subject to periodic review and renewal by the SEC,” the commission said.
The validity of the OLP license will also depend on the company’s compliance with reporting requirements, among other things. Meanwhile, those with additional PLOs must go through another application process for the future PLO.
Finance and loan companies with PLO licenses are required to report changes to or termination of their PLO within 10 days of its implementation.
The draft circular memorandum also provides penalties for those who fail to comply with the terms of the OLP license. Finance companies can be subject to penalties worth 100,000 and 200,000 pesos for the first and second offence, respectively, while loan companies can be fined 50,000 and 100,000. pesos.
“For the third offense, the SEC may impose a fine of at least twice the base sentence but not more than 1 million pesos; suspension of the OLP license for 60 days; or revocation of the OLP license, depending on the circumstances,” the SEC said.
“The Commission may also impose a daily fine of 400 and 200 pesos for finance and loan companies, respectively, in addition to the basic penalties,” she added.
The regulator said finance and loan companies that operate a PLO without complying with guidelines set forth by the SEC will have their certificate of authority or master licenses suspended or revoked, depending on the circumstances and severity of the violation.
The commission is now calling on interested parties to comment on the draft circular until December 3. — Keren Concepcion G. Valmonte