The Securities and Exchange Commission of Pakistan (SECP) has advised Google to remove all unauthorized and illegal digital lending apps after receiving dozens of complaints in January 2023. SECP reports that Google has agreed to act on the SECP guidelines and will be banning the lending apps soon.
Executive Director SECP Khalida Habib announced this in a workshop on the Non-Banking Financial Companies (NBFC) sector, in light of new regulatory requirements outlined under Circular 15.
She also said that the SECP has consulted with the local regulators including PTA, FIA, NTISB, and SBP as well as with Google and Apple for the removal of unauthorized apps and 58 unauthorized apps had been reported to Google for removal in January 2023.
A number of unlicensed lenders are reportedly operating in the country and advancing microloans without any collaterals. The commission received hundreds of complaints from citizens regarding such lenders’ unethical attitude, accessing their private data and then blackmailing and pressuring them to pay multi-fold high money over the principal loans.
“After negotiations with Google liaison office in Pakistan, 58 unauthorized digital lending apps were removed in January 2023,”
The fake lenders use different applications on Google, persuading people for getting loans, mostly those poor who are out of the formal banking system. Since the apps are in no one’s control, they exploit the people.
An applicant applied for a certain amount of loan, but he/she was given much less than required, while interest was applied on the basis of the amount for which the client had applied. Some have been given loans twice and thrice, without the applicant’s consent.
On the other hand, she said that SECP has also held detailed sessions with Easypaisa and Jazzcash (around 83% of the BB industry) for identifying mechanisms currently in place for early detection of misuse of these payment channels and any checks that can be introduced to prevent their misuse by illegal lending Apps.
The ED SECP said that the Non-Banking Financial Companies (NBFCs) disbursed Rs 63.589 billion to 2.4 million borrowers in 3.7 million loans. This results in an average loan size of Rs 17,000. Five out of 10 NBFCs, undertaking digital lending, disbursed Rs 37.4 billion in 2.318 million nano loans, she added.
She explained that SECP has stipulated minimum mandatory disclosures for digital lenders before loan disbursement to the borrower through Circular 15. These include the loan amount approved, annual percentage rates, the tenor of the loan, installments/lump sum payment amounts with the date(s), and all fees and charges, as well as Key Fact Statement (KFS).
She further said that SECP has also issued the lending standards to tackle concerns involving breaches of data privacy, and coercive recovery practices of licensed digital lending companies.
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, she said, adding that SECP has also specified a comprehensive grievance redressal mechanism over and above the current NBFC grievance redressal framework.
ED SECP Khalida Habib also said that SECP under circular 15 made prior approval mandatory to launch a Digital Lending App, after seeking a compliance certificate from PTA’s approved Cyber Security Audit Firm (CSAF).
After a series of complaints, the SECP issued ‘Circular 15’ for consumer protection. The circular stipulated minimum mandatory disclosures for the lenders before loan disbursement.
From January to November 2022, the NBFCs disbursed loans worth Rs63.58 billion with the authorities expecting the number to double in 2023.