Digital Lending – SECP cautions Digital Lending NBFCs of regulatory action if fair practices not adopted
ISLAMABAD (Rana Tariq): The Securities and Exchange Commission of Pakistan (SECP) has cautioned digital lending NBFCs of regulatory intervention if full disclosure and fair business practices are not ensured by the industry as a whole.
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, 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 the excessive regulatory burden, but would expect the industry to itself practice caution and develop standards that protect borrowers through adequate disclosure.
The representative of NBFCs shared their concerns, chief 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 unauthorized 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 SECP that despite the incidents of complaints on social media, the overall number of these complaints is a very small fraction compared to a 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.