The Securities and Exchange Commission (SEC) has announced a change in its stance on the registration of new online lending platforms (OLP), lifting the moratorium on their registration starting August 1.
The SEC has also raised the capital and disclosure requirements for financing and lending companies in a bid to improve regulatory oversight and boost consumer protection. Memorandum Circular No. 20 sets guidelines for financing companies (FC) and lending companies (LC), lifting the moratorium on new OLPs.
The SEC recognizes the need to promote responsible innovation and stimulate economic activity among FCs and LCs, while ensuring OLPs operate with consumer protection, market integrity, and prudential objectives.
The moratorium on new OLPs was put in place in November 2021 to address predatory lending and abusive debt collection practices. However, the lifting of this moratorium does not automatically grant approval for any OLP, and all FCs and LCs must meet disclosure, business plan, minimum paid-up capital, and operational requirements.
Under the new guidelines, FCs and LCs seeking to operate OLPs must maintain higher paid-up capital, with the amount depending on the number of platforms they own, operate, control, or utilize. Financing companies with one OLP must have a minimum paid-up capital of P20 million, while lending companies with one OLP must have a paid-up capital of P10 million.
The Lending Company Regulation Act of 2007 sets the minimum paid-in capital for lending companies at P1 million, but the SEC can impose higher capitalization requirements when necessary. The SEC has also capped the number of OLPs that can be owned and operated by financing and lending firms to five.
Existing FCs and LCs with one or more OLPs have 12 months to comply with the paid-up capital requirements corresponding to the number of platforms. Those that do not intend to comply must reduce their OLPs and disclose only OLPs supported by their existing capital levels.
The SEC has also introduced an annual licensing fee (ALF) at the entity level, computed based on the total assets reflected in the latest audited financial statements. This fee is intended to reflect the cost of continuing supervision, monitoring, and regulatory oversight.
The SEC has tightened consumer protection standards, including preventing financing and lending firms from releasing loan proceeds without borrowers' explicit and informed confirmation of final loan terms.
The new guidelines require companies to provide complete loan disclosures, allow borrowers reasonable time to review them, and properly record and trace loan approvals and confirmations. Collection communications must be conducted in a fair, transparent, and non-misleading manner, and borrowers have the right to disregard any collection communication that fails to reasonably identify the FC, LC, or OLP.
For unfair debt collection practices, LCs face a P60,000 fine for a first offense and P250,000 for a second offense, while FCs face a P100,000 fine for a first offense and P500,000 fine for a second offense.
