PH SEC Issues Moratorium on the Registration of New Online Platforms of Financing and Lending Companies
In a Memorandum Circular dated 2 November 2021 and a Press Release dated 5 November 2021, the Securities and Exchange Commission (SEC) has imposed a moratorium on the registration of new online lending platforms (OLPs) of financing and lending companies. Only the recorded lending and financing companies with OLPs as of 2 November 2021 may operate and be used for online lending/financing, which shall be subject to strict monitoring by the SEC of their compliance with all applicable laws, rules, and regulations. This, however, is without prejudice to the outcome of any pending administrative actions involving financing companies and lending companies.
Citing reception of numerous complaints relating to alleged violations by OLPs of existing regulations on the operation of, and the provision of lending and financing services, which resulted in the imposition of appropriate sanctions on erring entities, the SEC issued Memorandum Circular No. 10, Series of 2021 to address such complaints. The Circular also states that there is a need to closely monitor and assess the operations of existing OLPs in a manner that promotes lending and financing businesses, and allows the industry to thrive and develop, while minimizing any risk that comes with or is inherent in the operation of online lending, to ensure the protection of consumers.
SEC Chairperson Emilio B. Aquino in a Press Release said, “We are currently crafting new guidelines that will allow lending and financing companies to better address the needs of borrowers and, at the same time, plug loopholes that give rise to abusive and predatory practices.” Aquino also remarked on “…the emergence of financial technology companies that engage in predatory lending, taking advantage of those struggling financially during the pandemic” and added that “[t]he Commission will work toward stamping out these abusive financing and lending companies that do nothing but bury borrowers in even more debt.”
The same Press Release mentions that the SEC has cancelled the licenses of 35 financing/lending companies due to various violations of applicable rules and regulations. The certificate of registration of a total of 2,081 lending companies have also been revoked by the SEC for their failure to secure the requisite certificate of authority, pursuant to Republic Act No. 9474, or the Lending Company Regulation Act of 2007. Moreover, 58 online lending applications have been ordered to cease operations for lack of authority to operate as a lending or financing company.
The Moratorium took effect last 2 November 2021, and shall remain to be in effect until it has been formally lifted by the SEC.
The list of licensed lending and finance companies can be accessed here.
The full Memorandum Circular can be accessed here; while the Press Release can be seen here.