New report on lending apps fiasco offers recommendations to gov’t

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Non-profit group Foundation for Media Alternatives (FMA) has released a new report on the mobile lending issue, which has been lingering in the last couple of years due allegations of debt-shaming and other forms of harassment.


The report, titled “Loan apps: Financial inclusion at what cost?”, is the culmination of a study that was launched in late 2019 after numerous loan apps in the country became the subject of thousands of complaints.

The report delves into the underlying causes that spurred the growth of the digital lending industry, zeroing in on the popularity of microloans and the apps that have made them accessible to populations without access to traditional creditors.

Among the contributing factors cited are the digitization of financial transactions, availability of digital data, and low barrier of entry for interested businesses.

Drawing from the personal accounts of key stakeholders, it highlights the issues that have hounded loan apps and their developers. They include:

  • The absence of clear regulations, which has allowed lending companies to operate without the necessary permits;
  • Their opaque processes, especially their underwriting methodology; and
  • Excessive data collection activities.

Some apps require access to users’ text messages, file storage, vibration control, flashlight, Web history, and even their phones’ system settings. Other notable problems include high interest rates, hidden charges, misrepresentations, poor security protocols, and unethical debt collection practices.

The report closes with a number of recommendations. It urges government authorities to take a more proactive approach towards regulation, including exploring measures like a “small business borrowers’ bill of rights”.

It also cautions against calls for self-regulation by lending entities and endorses instead a joint or harmonized regulatory monitoring system.

For lenders, it advises the adoption of a “privacy-by-design” approach, which should entail a sound privacy program forming the backbone of their respective business enterprises and an opt-in model for data collection.

Finally, it reminds borrowers and consumer groups to always keep an eye on erring lending entities and make sure to exact accountability should the need arise.

The report is part of FMA’s series of briefing papers on Privacy and Data Protection in the Philippines.

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