Friday, April 19, 2024

Fintech players adopt ‘TechnoEthics’ to fight abuse by online lending firms

Members of FinTechAlliance.PH, an organization of fintech and digital firms, have agreed to institutionalize an industry-wide code of ethics and adopt a code of conduct among its member-companies for responsible online lending.

Photo shows officials from the FinTechAllinace.PH, BSP, and NPC during a recent press briefing

The alliance forged a partnership with the National Privacy Commission, Bangko Sentral ng Pilipinas, Securities and Exchange Commission, Anti-Money Laundering Council, Bureau of Internal Revenue, Department of Trade and Industry, and Insurance Commission to establish an industry standard on consumer protection, governance, compliance, data privacy, security, and digital literacy.

The initiative was made after three online lenders were recently cited by the NPC for data privacy violations.

The fintech group acknowledged that several online lending operators in Web and mobile apps are resorting to “public shaming” scheme on borrowers who default in their payment.

Without looking and reading the “fine prints,” online borrowers agree to the loan terms upon application including lender’s access to its contact list. As soon as the borrower fails to remit his or her monthly loan amortization, the online lender reaches out to the customer’s contacts and informs them about their financial situation, particularly his or her unpaid loan.

This, the group said, is an outright violation of the Data Privacy Act and other lending regulations. The usual victims are the socially disadvantaged members of society who also make up the bulk of the intended beneficiaries of financial inclusion.

According to FinTechAlliance.PH, there’s an estimated 124 fintech lenders in the Philippines comprising of 75 mobile apps, 40 Web-based, and five brick-and-mortar with tech platform. But less than half of these firms are registered with the government, the group noted.

“‘TechnoEthics’ is a framework on the ethical utilization of emerging technologies, protecting consumers against the misuse and abuse of innovations, and adoption of common principles to guide players about new advances in technological development and application to benefit society,” said Lito Villanueva, chairman of FinTech and chief innovation and inclusion officer of RCBC.

Villanueva said fintech players are prohibited from manipulating customer data with the objective of disbursing more loans. Alliance members who provide online lending will be required to fully disclose all costs to the customers, including interest rates, processing fees, and fines for late payment.

Villanueva said fintech players are also required to mention addresses, emails and telephone numbers so that customers are able to lodge complaints. He said the code of conduct also aims to prevent excessive disbursements of loans to customers that could trap them in bad debt.

Over 5,000 harassment complaints from customers have been reported to the NPC, who said that online lending apps have misused the borrower’s information, including the disclosure of unpaid balances to other people. Both the NPC and the SEC are investigating the matter.

“The investigation determined that their online lending business practice specifically targets the privacy of persons, practically making a profit out of people’s fear of losing face and dignity. These unethical practices simply have no place in a civilized society and must stop,” said NPC commissioner Raymund Liboro.

“This industry-wide code of ethics and code of conduct should help steer the financial technology or fintech industry toward higher standards of behavior and away from attempts to exploit it for money laundering, terrorist financing, fraud and invasion of privacy, for instance,” the SEC said in a statement.

In Jakarta, Indonesia, a 35-year-old taxi driver named Zulfadli committed suicide in February 2019 after leaving a note explaining that he could no longer face the piling debt from online lending platforms and the incessant intimidation from the lenders.


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