Digital lenders: SECP restricts issuance of minimum mandatory disclosures for borrowers

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has made it mandatory for the digital lenders, undertaking lending activities through digital channels/mobile applications (Apps), to issue minimum mandatory disclosures for their borrowers.

Senior SECP officials told Business Recorder here on Saturday that the requirements stipulate the minimum mandatory disclosures to borrowers at all stages after the digital App download and before entering into loan agreement.

The disclosures included; information regarding App access to user data during the App registration process, and the privacy policy, markup rate, financing details, fee and charges, early settlement charges and contact details before the borrower enters into a loan agreement.

The officials said that the significant disclosure in the form of Key Fact Statement (KFS) are required before the loan disbursement to the borrower including; loan amount approved, cooling-off period, Annual Percentage Rates, tenor of loan, installments/lump sum payment amounts with date(s), all fee and charges, inter alia processing fee, late payment charges and per day charges for late payments. To ensure transparency and ease of understanding, the App shall display the summary of KFS through a video/audio, screen shot and email/SMS in both English and Urdu languages. Any fee not included in KFS will not be charged to the borrower.

Digital lenders are restricted to make any upfront deductions (first instalment, charges, fee etc) from the approved loan amount. Similarly, the terms and conditions along with Annual Percentage Rate as agreed between digital lender and borrower at time of grant of loan shall not be subsequently changed without prior consent of the borrower including automatic increase in credit limit. In addition, disbursement and recovery shall be carried out only through the bank account/branchless banking accounts of the digital lender and disbursement shall be ensured to be made in the bank account/branchless banking account of the borrower, the officials maintained.

Digital loan disbursement shall be subject to acceptance of all the underlying terms and conditions by the borrowers. Digital lender shall also ensure digital provision of loan sanction letter, terms and conditions, account statements and privacy policies with respect to borrower’s data, to the borrower through email/ SMS upon execution of the loan contract. The Commission has also specified a comprehensive grievance redressal mechanism with detailed monthly reporting over and above the current NBFC grievance redressal framework, the officials added.

Copyright Business Recorder, 2023