The Securities and Exchange Commission (SEC) has issued draft guidelines for the registration and operation of online lending platforms, an amendment to its previous regulations in line with efforts to eliminate abusive and predatory practices.
The SEC released the draft guidelines for comment on Nov. 19, following a moratorium on registering new online lenders two weeks earlier.
The draft guidelines will apply to both existing and newly registered finance and lending companies that have not yet owned, operated or used a lending platform and other fintech modes. , as well as those already engaged in fintech, which aims to provide their credit products and related services.
Under the proposed guidelines, no finance or loan company will be permitted to own, operate or use an online lending platform or engage in financial technology without registration and prior approval by the SEC. The company’s ability to engage in fintech should also be included in its objective as stated in its statutes.
In addition to being registered and licensed as finance or loan companies, license applicants must also have at least five directors and at least two independent directors, or such a number as will constitute 20 percent of the members of the board. board of directors, according to above.
The SEC’s corporate governance and finance department will then assess the documents submitted by the applicant company. The finance or loan company will then present its business and operating plan as well as its marketing strategy, target market, interest rates, loan products and services to a panel of SEC representatives.
The finance or lending company will also provide an overview of the actual user experience simulation, its complaints handling process, and a discussion of the extent of the data to be collected by the platform and how it is to be collected. would be processed.
An SEC panel will then submit its recommendation to the SEC en banc, which will decide whether to accept or deny the request. Rejected finance and loan companies can reapply after one year and must demonstrate that the reason for the rejection no longer exists.
According to the draft guidelines, the license has an initial validity of one year from the date of issue, subject to periodic review and renewal by the regulator.
Finance companies that fail to comply with the license conditions will be subject to penalties of 100,000 pesos for the first offense and 200,000 pesos for the second offense. Loan companies will be subject to penalties of P 50,000 and P 100,000 for the first and second infractions, respectively.
For the third offense, the SEC may impose a fine of at least double the basic penalty but not more than P1 million; license suspension for 60 days; or revocation of the license.
The regulator can also impose a daily penalty of P400 and P200 for finance and loan companies, respectively, in addition to the basic penalties.