UMVA has learned that the Securities and Exchange Commission is seeking public feedback on its latest draft guidelines for online lending firms, which aim to lift a 2021 registration moratorium and tighten regulatory requirements for these companies.
The new draft proposes stringent capital, governance, and consumer protection requirements for financing and lending companies operating online lending platforms. A significant change is the requirement for new financing companies to maintain a minimum paid-up capital of P15 million, while new lending companies need at least P5 million.
Existing companies, however, will not be required to immediately adjust their capital levels unless they expand their operations. This marks a departure from the previous draft, which sought to impose new capital requirements on both upcoming and existing companies.
The Commission is also proposing capital requirements for financing or lending companies that own, operate, or use online lending platforms, which will be higher if they have more than one platform. For instance, financing companies operating just one platform will be required to maintain a minimum paid-up capital of P20 million, while those operating four or five platforms will need P100 million.
The draft rules also limit financing and lending companies to operating a maximum of five online lending platforms, a prudential limit intended to ensure effective supervision, adequate governance, and manageable consumer risk exposure. Each platform will be determined on the basis of a distinct borrower-facing brand, name, application, or digital identity.
A two-year transition period has been set for compliance with these capital requirements. Additionally, the proposal adopts a Single Certificate of Authority policy, under which a financing or lending company would be issued one certificate covering its principal office, branch offices, and online lending platforms.
The draft guidelines also focus on consumer protection, prohibiting financing and lending companies from disbursing loan proceeds without a borrower’s explicit and informed confirmation of the final loan terms. Automatic renewal of loans will also be prohibited.
Furthermore, financing and lending companies must ensure that their online lending platforms clearly disclose to borrowers the computation that shows the true cost of credit, including the total loan amount, applicable rates, and all other fees or charges. They must also present the payment schedule and applicable penalties for late payments.
The proposed rules also require collection communications to clearly identify the registered name of the company and the specific online lending platform involved. Higher penalties for violations of the Memorandum Circular are also proposed, ranging from P50,000 to P100,000 for the first offense, and up to P1 million, suspension of activities, or revocation of certificates of authority for subsequent offenses.
UMVA can exclusively reveal that the Commission is taking a tough stance on unfair debt collection practices, and persons found guilty may face severe penalties. The public has until June 15 to submit feedback on the latest draft guidelines.
