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SECP intervenes to protect borrowers from digital lenders

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) ons Wednesday issued circular no. 15 directing the digital lending platforms to refrain from using coercive measures for recoveries. The circular also restricted digital lenders from storing borrowers’ data on any cloud infrastructure outside the jurisdiction of Pakistan.

Additionally, the commission also issued digital lending standards applicable to Non-Banking Finance Companies (NBFCs) undertaking lending activities through digital applications (apps).

The circular has restricted the lenders not to contact the persons in the borrower’s contact list, other than those who have been specifically authorised by the borrower as guarantors and who have also provided their consent to the digital lender at the time of loan approval.

The regulator made these announcements in response to increasing public concerns that digital lending companies engaged in misselling, data privacy violations and forceful recovery techniques.

Recently the Competition Commission of Pakistan (CCP) has taken notice of violations and deceptive marketing by the mobile applications offering nano personal loans and asked the aggrieved people to lodge their complaints to the CCP in this regard.

The notice is posted on the SECP website for public consumption and awareness and sent to authorized digital lending businesses.

The SECP mandated that the lending apps must show the Key Fact statements summary in both English and Urdu through a video /audio, screenshot . email and SMS.

While the lending businesses must specify minimum mandatory disclosures and terms before the loan disbursement , the whole exercise should improve transparency and ease of understanding.

The disclosures need to include loan amount approved, annual percentage rates, tenor of loan, installments/lump sum payment amounts with date, and all charges. Any fee not included in KFS will not be charged to the borrower.

At the same time to discourage non-licenced operators, the licenced digital lender shall be required to disclose its full corporate name and licencing status on its lending platform/app, and ensure that any advertisement and publication shall be fair and not contain misleading information.

Further, to ensure the confidentiality and privacy of data, the digital lender will not be allowed access to the borrower’s phone book or contact list, or photo gallery, even if the borrower has given consent in this regard.

The SECP has also specified a comprehensive grievance redressal mechanism over and above the current NBFC grievance redressal framework.

Zahra Sikandar
Written By

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