New licences on hold after lending apps caught sending threatening messages
The Philippines’ Securities and Exchange Commission took action after receiving reports of abuses by some companies using borrowers’ phones to shame them for failing to pay their debt. Because of COVID-19, online credit is growing but 80 per cent of Filipinos do not meet bank loan requirements.
Manila (AsiaNews) – The Philippines’ Securities and Exchange Commission (SEC) has decreed a moratorium on the registration of new online lending platforms because of more and more reports of abuse and predatory practices.
Recent investigations found that some apps shame customers who fail to pay by texting and calling their friends and relatives.
This comes after the National Privacy Commission investigated some of these apps for extracting sensitive data like contacts on borrowers’ smartphones.
Online lending is experiencing strong growth throughout Southeast Asia, partly due to the difficulties in accessing traditional credit.
By late 2019, 124 online lenders were operating in the Philippines, 75 directly active with mobile apps.
According to recent research, 80 per cent of adult Filipinos do not meet the requirements for a bank loan. By contrast, online systems offer easy access via mobile phones with few documents required to be provided online.
However, such systems are not very transparent. “We have seen the emergence of financial technology companies that engage in predatory lending, taking advantage of those struggling financially during the pandemic,” said SEC chairperson Emilio Aquino.
“The Commission will work toward stamping out these abusive financing and lending companies that do nothing but bury borrowers in even more debt,” he added.
Although companies already registered will be able to continue to operate, the SEC has promised to adopt more stringent rules and impose greater controls. Meanwhile, some 35 lending companies have had their licence to operate revoked.