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Monday, February 6, 2023
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HomeNationalSECP intervenes to protect borrowers from digital lenders

SECP intervenes to protect borrowers from digital lenders

The Securities and Exchange Commission of Pakistan (SECP) barred the digital lending platforms from sending borrowers’ data outside of Pakistan and limited their ability to use coercive means to recover debts on Wednesday.

The SECP has instructed the digital lenders to refrain from storing the borrowers’ data on any cloud infrastructure located outside of Pakistan by issuing Circular No. 15 to them.

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The commission has also published guidelines for digital lending that Non-Banking Finance Companies (NBFCs) using digital channels or mobile applications must follow (apps).

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

The notice has been posted on the SECP website for public consumption and awareness and sent to authorize digital lending businesses.

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The SECP has mandated that the loan app must show the Key Fact Statement (KFS) summary in both English and Urdu through a video/audio, screenshot, email, and SMS.

While the lending businesses must specify minimum mandatory disclosures and provisions before loan disbursement to the borrower, this action attempts to improve transparency and ease of comprehension.

These include the total amount of the loan, the annual percentage rate, the length of the loan, the amount of each monthly or lump sum payment, the date, and all fees. The borrower won’t be required to pay any fees that aren’t covered by KFS.

The licensed digital lender must make sure that any advertising and publications are honest and do not contain misleading information while also being required to display its entire corporate name and licensing status on its lending platform/app to deter non-licensed operators.

In addition to the current NBFC grievance redressal structure, the SECP has additionally established a thorough grievance redressal system.

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