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SECP asks Google, Apple not to allow illegal digital lending apps on their platforms

  • CCP finds micro loan providers charge higher interest rates than those advertised
Published January 6, 2023
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In an effort to curb illegal digital lending, the Securities Exchange Commission of Pakistan (SECP) has written letters to Google and Apple, urging them not to allow unlicensed digital lending applications on their respective app stores.

SECP Chairman Akif Saeed said on Friday that applications of unregistered and unlicensed non-banking service providers should not be placed on Google Play Store and Apple Store while responding to a query of Business Recorder in a meeting with a group of journalists.

“We have asked the two companies not to allow such apps on their platforms. It will now be easier to communicate with Google as it has opened its office in Pakistan,” Saeed said.

Digital lending companies: Compliance certificates made mandatory

Last month, Google opened its liaison office in the country, and also registered with the SECP. The chairman further said that SECP is collaborating with mobile wallet and digital payment solution providers such as Jazz Cash and Easypaisa to prevent illegal digital lending.

“SECP has asked digital money transfer platforms in Pakistan not to facilitate payments to illegal non-banking entities,” he added.

Last month, the Competition Commission of Pakistan (CCP) started a probe into app-based ‘nano’ and ‘micro’ personal loan providers, with initial findings indicating that the businesses were looking to provide services without fulfilling legal requirements of Non-Banking Microfinance Companies (NBMFCs).

A CCP official had told Business Recorder that an initial investigation revealed that these micro loan providers were charging higher interest rates than advertised, exploiting mainly the lower and middle income groups.

The CCP said that it has also found instances of faulty claims of data privacy and security from these loan providers and it believed that they collect personal data on the pretext of offering loans.

The NBMFC law offers a framework to regulate nano-loans of amounts that are more than Rs10,000, whereas most of these applications are offering smaller loan amounts.

According to CCP’s findings, these nano loan providing applications have been downloaded well over 10 million times by the general public.

Digital lenders disbursed Rs33bn loans during last fiscal, says analyst

Last month, SECP also took notice of rising concerns involving mis-selling, breach of data privacy and coercive recovery practices of licensed digital lending companies.

It also issued a directive to safeguard public interest and ensure fair treatment of borrowers in the digital lending ecosystem.

Through a circular, SECP issued digital lending standards applicable on NBFCs undertaking lending activities through digital channels and mobile applications.

The requirements stipulate minimum mandatory disclosures and provision of key fact statement (KFS), before loan disbursement to the borrower. These include, loan amount approved, annual percentage rates, tenor of loan, installments/lump sum payment amounts with date(s), and all fees and charges.

To ensure transparency and ease of understanding, the digital application shall display the summary of KFS through a video/audio, screenshot and email/SMS in both English and Urdu languages, according to SECP.

Moreover, any fee not included in KFS will not be charged to the borrower. To discourage non-licensed digital lenders, the licensed digital lender shall be required to disclose its full corporate name and licensing status on its lending platform(s)/app(s), and ensure that any advertisement and publication shall be fair and not contain misleading information, as per SECP’s conditions.

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

The lender shall also not be allowed to contact the people in the borrower’s contact list, other than those who have been specifically authorized by the borrower as guarantors and who have also provided their consent to the digital lender at the time of loan approval.

Moreover, the data shall not be stored on any cloud infrastructure outside the jurisdiction of Pakistan.


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