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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) is empowered to take action against the digital lending solution companies on the complaints of their customers alleging exorbitant interest rates and other charges, coercive recovery tactics and misleading disclosures regarding loan amounts.

Officials of the SECP informed media at the SECP headquarters here on Monday that the SECP has noted from the contents of these complaints filed against the digital lending solution companies that the customers after defaulting on the loan usually end up in lodging complaints against these companies with the SECP.

They were responding to reports about exorbitant interest rates, inadequate disclosures, and coercive collection practices, purportedly being resorted to by lending platforms.

The companies as advised by the SECP have been working on improving disclosure and transparency of its lending arrangements in public interest. The registration documents and memorandums of companies are required of all companies registered as digital lending solution companies. As per the seventh schedule of the Companies Act, 2017, this information is available from the SECP’s Company Registration Offices (CROs) upon payment of the prescribed fee of Rs500, they said.

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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 the 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.

It is further apprised that under the current NBFCs Regulatory Framework, the SECP grants Investment Finance Services license to the NBFCs for undertaking lending activities (including microfinancing, discounting, leasing, housing finance) and a licensed entity can engage in lending through conventional means or through a digital medium, and there is not a separate license issued for digital lending.

Since digital lending is a recent phenomenon, there are currently no specific requirements in place covering digital aspect of the lending and the same requirements are applicable as to other NBFCs apply. Moreover, the company is also required to deliver to the Borrower, at the time a finance is granted, a statement showing in clear and distinct terms the amount, date of the disbursement, monthly installment, the nature of the security, if any, the name and address of the Borrower and the rate of mark-up to be charged.

According to the loan demonstration shared by one of the companies, the loan amount along with the repayment amount and repayment date is clearly disclosed to the customers before the loan disbursement.

Customers always have the option to cancel the loan in case they do not agree to any terms and conditions of the loan provider company, they added.

Copyright Business Recorder, 2022

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