After receiving scores of complaints in January 2023, the Securities and Exchange Commission of Pakistan (SECP) advised Google to eliminate all unapproved and illegal digital lending apps. According to SECP, Google has decided to follow the SECP recommendations and will shortly ban the loan apps.
This was made public by SECP’s Executive Director Khalida Habib during a workshop on the Non-Banking Financial Companies (NBFC) industry in light of the updated regulatory standards outlined in Circular 15.
She added that 58 illicit apps had been reported to Google for removal in January 2023, and that the SECP had spoken with local regulators such as the PTA, FIA, NTISB, and SBP as well as with Google and Apple for the removal of unauthorised apps.
According to reports, a number of unauthorised lenders are active in the nation and are disbursing microloans with no security. Several residents complained to the commission about these lenders’ unethical behaviour, including obtaining their personal information and using it to blackmail and pressure borrowers into paying many times the amount of the original loan as additional payments.
58 unlawful digital lending apps were deleted in January 2023 following discussions with the Google liaison office in Pakistan,”
The bogus lenders use several Google applications to get people to take out loans, primarily the poor and those who are not currently enrolled in a formal banking system. The apps take advantage of people since no one has any control over them.
An applicant requested a certain amount of loan funding, but was supplied significantly less than needed while interest was charged based on the requested loan amount. Without the applicant’s permission, some people have received loans twice and even three times.
On the other hand, she claimed that SECP had also held in-depth meetings with Easypaisa and Jazzcash (which together account for about 83% of the BB market) to determine the current systems in place for the early detection of misuse of these payment channels and any controls that might be put in place to prevent misuse by illegal lending Apps.
According to the ED SECP, 3.7 million loans of Rs 63.589 billion were made available by NBFCs to 2.4 million borrowers. The resulting average loan amount is Rs 17,000 per loan. She continued by saying that five out of ten NBFCs engaged in digital lending distributed Rs 37.4 billion in 2.318 million nano loans.
She said that through Circular 15, SECP has mandated minimal mandatory disclosures for digital lenders prior to loan payment to the borrower. The loan amount allowed, annual percentage rates, the length of the loan, the amount of each installment or lump sum payment and the date(s), all fees and charges, and the Important Fact Statement are among these (KFS).
She added that in order to address issues with data privacy violations and coercive recovery tactics by licenced digital lending organisations, SECP has also released lending regulations.
She added that in order to deter unlicensed digital lenders, licenced lenders will be required to disclose their full corporate name and licencing status on their lending platform(s)/App(s), as well as ensure that any advertising and publication is fair and does not contain misleading information. SECP has also specified a comprehensive grievance redressal mechanism in addition to the existing NBFC grievance redressal framework, she said.
SECP ED In addition, according to Khalida Habib, SECP’s Circular 15 made obtaining prior clearance necessary in order to create a digital lending app after obtaining a compliance certificate from a PTA-approved cyber security audit firm (CSAF).
Following a number of complaints, the SECP released “Circular 15” to protect consumers. Before loan distribution, the lenders were required by the circular to make the bare minimum of mandatory disclosures.
The NBFCs disbursed loans of Rs63.58 billion from January to November 2022, and the authorities anticipate that this sum will increase in 2023.