THE SECURITIES and Exchange Commission (SEC) is moving to lift its 2021 moratorium on the registration of latest online lending platforms (OLPs) and is in search of public feedback on a proposed framework that might require as much as P100 million in capital for the most important operations and set a three-year compliance period for existing firms.
Published on March 11, the draft circular seeks to lift the moratorium on recent OLPs and introduce a “pay-to-scale” framework geared toward enhancing consumer protection and market stability.
The proposed guidelines link the best to operate digital platforms on to an organization’s paid-up capital. For financing corporations (FCs), the necessities are graduated based on the variety of apps they manage: P30 million for one OLP, P60 million for 2 to 5, and P100 million for the utmost allowable limit of 10 platforms.
Lending corporations (LCs) face an identical but lower-scaled requirement, topping out at P50 million for 10 platforms.
“Subject to full compliance with the necessities prescribed under this circular, the Commission hereby lifts and supersedes MC 10 and allows the disclosure and recording of latest OLPs to be owned, operated, or utilized by FCs and LCs. The lifting of the moratorium under this section shall not be construed as an automatic or unconditional approval of any OLP,” the draft circular reads.
THREE-YEAR TRANSITION
Existing firms won’t need to satisfy the necessities immediately but must comply inside a three-year transition period. Inside 60 days of the circular’s effectivity, all current lenders must submit a “capital compliance plan” outlining how they are going to meet interim milestones: 30% compliance in the primary yr, 60% within the second, and full compliance by the top of the third.
For firms that fail to satisfy these standards by the deadline, the draft provides an exit framework.
“Entities that remain noncompliant after the transition period shall be required to: stop onboarding recent borrowers through excess OLPs; submit a discontinuance plan for approval by the Commission; and ensure proper servicing of existing loans under Commission supervision,” the SEC’s draft circular reads. The SEC also warned that it could order the “consolidation, discontinuance, or migration of borrower accounts to compliant OLPs” for noncompliant firms.
ENDING ‘BRAND FRAGMENTATION’
A key pillar of the proposed framework is an anti-circumvention clause that targets the industry practice of “white-labeling” or rebranding multiple apps to evade oversight.
The SEC said it’ll apply a “substance-over-form” approach to discover integrated platform structures.
“Any try to fragment, replicate, rebrand, white-label, or structurally reorganize OLPs for the aim of avoiding capital requirements, disclosure obligations, or supervisory limits shall constitute circumvention and shall be subject to administrative sanctions,” the draft reads.
Hunted for comment, Rizal Industrial Banking Corp. Chief Economist Michael L. Ricafort said the rules aim to balance consumer protection with market growth.
“[The proposed guidelines are] primarily to guard and uphold the interests and rights of the borrowing public, while providing greater decisions and competition for most of the people.”
The general public has until March 25 to submit comments on the draft before the SEC finalizes the foundations, that are currently slated to take effect on April 1. — A.G.C. Magno