The Securities and Exchange Commission (SEC) is planning to lift the moratorium on the registration of new online lending platforms (OLPs), while introducing stricter regulatory requirements aimed at protecting borrowers and improving oversight of the digital lending industry.
The SEC said it issued on March 12 a draft memorandum circular for public comment that outlines guidelines for lifting the moratorium and imposing new prudential, disclosure, and market conduct standards on financing and lending companies operating online platforms.
The moratorium on new OLPs has been in place since Nov. 5, 2021 under SEC Memorandum Circular No. 10, Series of 2021, following complaints about abusive lending and debt collection practices by some digital lenders.
“The proposed lifting of the moratorium recognizes the need to promote responsible innovation, stimulate economic activity among FCs and LCs, and ensure that the operation of OLPs is aligned with consumer protection, market integrity, prudential objectives, financial inclusion, ease of market access, and the global trend toward digitalization,” the SEC said.
Under the proposed rules, financing and lending companies will face new paid-up capital requirements depending on how many online lending platforms they operate.
Financing companies that do not run an OLP will be required to maintain at least P20 million in paid-up capital, while lending companies must have P10 million.
For financing companies operating online lending platforms, the minimum capital will increase to P30 million for one OLP, P60 million for two to five OLPs, and P100 million for up to 10 OLPs. Lending companies will need P20 million for one OLP, P30 million for two to five, and P50 million for up to 10 platforms.
The proposed rules also cap the number of online lending platforms a company may operate at 10, a measure intended to ensure manageable oversight and reduce systemic risks.
Existing financing and lending companies will be given three years to comply with the new capital requirements through a capital compliance plan to be submitted to the SEC.
The draft circular introduces a single Certificate of Authority (CA) policy, under which each financing or lending company will receive one certificate covering its principal office and all branch offices, replacing the current system of issuing separate certificates for branches.
The SEC is also proposing an asset-based annual licensing fee, ranging from 0.10% to 0.35% of a company’s total assets, instead of branch-level annual fees.
Stronger consumer protection provisions are also included in the proposal. Online lenders will be prohibited from accessing or scraping borrowers’ contact lists, social media contacts, or messaging records from mobile devices. The use of such personal data to harass borrowers or reveal their debts to third parties will also be banned.
In addition, automated or pre-programmed messages may not be used for debt collection except for neutral payment reminders that do not contain threats or coercive language.
Online lending operators will also be required to register with the Credit Information Corporation (CIC) and use available credit data in assessing borrowers before approving loans.
The SEC said the public may submit comments and recommendations on the proposed guidelines until March 25.
