Digital lenders: Only SECP-approved apps available on its website are legal

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Wednesday announced that only SECP’s approved/licensed apps of digital lenders, available on the SECP’s website, are authorised and legal.

In accordance with its mandate of developing capital and financial markets, the SECP continuously reviews and reforms its policies, dovetailing its efforts towards promoting ease of doing business through technological advancements, expanding financial inclusion, lowering entry barriers, and transparently enforcing laws to protect people’s rights.

The SECP regulates Non-Banking Finance Companies (NBFCs) which are authorised to undertake lending. Some of these NBFCs have also ventured into personal loans through digital apps.

A list of the SECP approved apps is available on the SECP’s website. Other than these, all apps available on various play/app stores are unauthorised and illegal.

To combat the menace of illegal apps, the SECP has been actively engaged with Google, which on April 05, 2023 announced its Personal Loan App Policy for Pakistan, effective from May 31, 2023.

Pakistan is the 6th country in the world, after India, Indonesia, the Philippines, Nigeria and Kenya, for which Google has introduced additional requirements for digital lending apps. The policy contains check and balances to avoid listing illegal apps on Play store and sets stringent requirement to minimize access to personal data of the consumer. Google removed 84 illegal lending apps reported by the SECP from its Play Store.

In December 2022, the SECP introduced requirements for NBFCs, engaged in digital lending, to protect the interests of borrowers. The main features include clear disclosure about their fees, tenure of loan, number of installments, early and late payment charges etc.

All this information is provided to customers before disbursement of loan. Access to consumers personal data (contact list, photo gallery etc) is strictly forbidden. There is a cooling off period of 24 hours, during which the customer can withdraw from the loan agreement by repaying the principle amount to the lender. NBFCs giving digital loans cannot operate more than one app. The companies call agents can only call their customers through registered phone numbers, using recorded lines.

The lender and its agents must adhere to ethical and legal standards when collecting loan amounts. They are prohibited from engaging in unfair practices such as contacting borrowers at inappropriate times, resorting to violence or illegal means, using offensive language, employing improper debt collection tactics, or engaging in any behavior that harasses or abuses individuals in debt. The SECP has a robust enforcement system in place to check for noncompliance.

For companies which want to do digital lending the SECP follows a two-tier process. Firstly, they have to obtain license to form an NBFC, the licensing due diligence, include a fit and proper evaluation of sponsors and directors and nomination of an independent director on the board and a minimum equity requirement. In stage two app approval is given based on the CSAF auditors’ certificate to ensure data and app security after due diligence of the disclosure requirements.

To address the issue of unlicensed digital lending apps operating illegally in the country, the SECP has extensively liaison with various regulatory bodies, including the Pakistan Telecommunication Authority (PTA), Federal Investigation Authority (FIA - Cyber Crime Wing) and State Bank of Pakistan (SBP). As result the SBP issued Circular in June 2022, denying access to illegal apps to banking/payment channels.

The SECP launched a media awareness campaign to educate consumers on data privacy and their rights, involving mainstream and social media, capacity building workshops and SMS/In app notifications. The general public is encouraged to only download approved digital loan Apps. The list of digital lending apps available on link; https://shorturl.at/jtJO1.

The borrowers should also review the app’s permissions before signing up, read and evaluate the disclosures, regarding fees, late payment charges, loan tenor, cooling-off period, and the privacy policy. Users are also advised to report complaints against licensed apps to the SECP through dedicated complaint portal at th SECP’s website https://sdms.secp.gov.pk/sdmsadmn/. All complaints are thoroughly examined and resolved promptly.

Copyright Business Recorder, 2023