Digital lending sector: Strict action to be taken against unregulated entities: SECP

ISLAMABAD: In collaboration with other regulators and law enforcement agencies, the Securities and Exchange Commission of Pakistan (SECP) on Wednesday assured the digital lending companies that strict action will be taken against illegal platforms/unregulated entities operating in the digital lending sector.

The SECP has also cautioned digital lending non-banking finance companies (NBFCs) of regulatory intervention, if full disclosure and fair business practices are not ensured by the industry as a whole.

The SECP called a zoom meeting of the chief executives of NBFCs engaged in digital lending to discuss recent media reports about exorbitant interest rates, inadequate disclosures, and coercive collection practices, purportedly being resorted to by lending platforms.

During the meeting, the SECP advised the digital lending NBFCs to adopt best lending practices, ensure full disclosures and fair treatment of borrowers, avoid excessive pricing, deploy a robust complaint resolution mechanism, and ensure privacy protection and data security. The lenders were informed that SECP does not want to stifle this nascent industry with excessive regulatory burden, but would expect the industry to itself practice caution and develop standards that protect borrowers through adequate disclosure.

SECP introduces concept of ‘Digital Lending’ for NBFCs

The representative of NBFCs shared their concerns, main among which was the existence of a large number of unregulated entities operating in the digital lending sector. The attendees shared that these unlicensed and unauthorised apps are engaged in bringing the regulated sector into disrepute.

They were informed that the SECP has already taken cognizance and very soon, in collaboration with other regulators and law enforcement agencies, strict action will be taken against these illegal platforms.

The representatives of NBFCs also shared that even some licensed NBFCs were approached for subletting their license, an offer which the industry participants have rejected.

The NBFCs also informed the SECP that despite the incidents of complaints in social media, the overall number of these complaints was a very small fraction compared to total number of loans extended by these digital lenders. They said that the number of satisfied customers was much larger in comparison to the unhappy customers.

Copyright Business Recorder, 2022