The Securities and Exchange Commission (SEC) has issued the draft guidelines for the registration and operation of online lending platforms (OLPs), in line with efforts to stamp out abusive and predatory practices.
The SEC released for public comment the draft guidelines on November 19, following the imposition of a moratorium on the registration of new OLPs on November 5.
The proposed guidelines will apply to both existing and newly registered financing and lending companies who have yet to own, operate, or utilize OLPs and other modes of financial technology (fintech), as well as those who are already engaged in fintech, who look to provide their credit products and related services.
Under the proposed guidelines, 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 company’s ability to engage in fintech must also be included in its purpose as stated in its Articles of Incorporation.
Aside from being duly registered and licensed as financing or lending companies, applicants for an OLP license must also have at least five directors and at least two independent directors, or such number that that will constitute 20% of the members of the board of directors, whichever is higher.
The SEC Corporate Governance and Finance Department (CGFD) will then evaluate the documents submitted by the applicant company. The panel will then submit its recommendation to the commission, who will decide on whether to grant or deny the application. The SEC’s decision will be considered final.
Financing companies who fail to comply with the conditions of the OLP license will be subject to penalties amounting to P100,000 for the first offense and P200,000 for the second offense. Similarly, lending companies will be subject to penalties of P50,000 and P100,000 for the first and second offense, respectively.
For the third offense, the SEC may impose a fine of not less than twice the basic penalty but not more than P1 million; suspension of the OLP license for 60 days; or revocation of the OLP license, as appropriate for each circumstance.
The SEC may also impose a daily penalty of P400 and P200 for financing and lending companies, respectively, on top of the basic penalties.
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 (CA) and primary license.
Financing and lending companies, which commence the operations of OLPs, without complying with the guidelines shall have their CAs or primary licenses suspended or revoked, depending on the facts, circumstances, and gravity of the offense.
The SEC may, at its discretion, set a limit on the total number of OLPs that may be established. The commission shall take into consideration the total number of applications received, OLPs already existing, and its effects on the industry and the general public.
The draft Memorandum Circular on the Guidelines on the Registration and Licensing of Online Lending Platforms may be accessed through the SEC website. All interested parties have until December 3 to submit their comments and inputs to the CGFD by email to cgfd_md@sec.gov.ph.
