BusinessPakistan

120 Online Loan Apps Blocked by SECP in Pakistan

The Securities and Exchange Commission of Pakistan (SECP) has taken a significant step towards consumer protection by blocking 120 online loan applications. The updated list of online loan apps has been published on the SECP website for public awareness.

The SECP has advised users to download apps only from verified play stores as the illegal apps on other channels threaten the users. The Apps operators have created different channels replacing Google and Apple play stores, raising concerns about user safety.

The SECP imposed pricing caps on online apps and digital platforms offering personal loans. This move was aimed at promoting responsible lending and enhancing consumer protection. The SECP issued comprehensive requirements for Non-Banking Financial Companies (NBFCs) offering digital personal loans via mobile applications.

In August, the SECP introduced a new set of rules for online loan apps to curb predatory practices and ensure the financial sustainability of the borrowers. The SECP imposed stricter rules for online loan apps by setting a maximum limit of loans, loan period, and restrictions on using the debtors’ data.

To ensure the financial sustainability of the borrowers in the digital nano-lending sector, the SECP has imposed exposure limits on digital lenders and borrowers. A maximum limit of Rs25000 has been imposed for individual borrowers from a single loan app, and the aggregate amount of loans from multiple Apps has been restricted to not exceed Rs75,000. Moreover, the loan period for a nano-loan through personal loan apps has been restricted to not more than 90 days.

These measures are expected to promote responsible lending behaviours and prevent borrowers from being trapped in debt cycles due to multiple loans. To ensure cyber security and protect the sensitive data of borrowers, personal loan apps must obtain a certificate from a PTA-approved Category I Cyber Security Audit Firm (CSAF).

The SECP has licensed several non-banking financial companies (NBFCs) to offer personal loans through digital applications. In December 2022, SECP introduced a mandatory requirement for digital lending NBFCs to protect borrower interests by requiring transparent disclosure of fees, loan duration, instalments, and charges.

The SECP has also restricted unauthorized and illicit apps, collaborating with Google to introduce Pakistan’s Personal Loan App Policy on May 31, 2023. As a result, Google removed 84 illegal lending apps from its Play Store following SECP’s reports.

SECP is proactively evaluating and adapting policies to increase financial access and curb manipulative business practices aimed at safeguarding the interest of consumers and investors. After extensive consultation and coordination with stakeholders, including industry participants, the regulator is considering imposing pricing caps on annual percentage rates (APRs) and a total cost cap on digital nano loans.

 

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