The Securities and Exchange Commission of Pakistan (SECP) on Wednesday prohibited digital lending platforms from sending borrowers’ data outside of Pakistan and limited their ability to use coercive means to recover debts.
The SECP has instructed the digital lenders through Circular No. 15 that the borrowers’ data cannot be stored on any cloud infrastructure that is under the control of a country other than Pakistan. The SECP commission has also published new guidelines for digital lending that Non-Banking Finance Companies (NBFCs) using digital channels or mobile applications must follow. The regulator made these announcements in response to growing concerns about mis-selling, data privacy violations, and intrusive recovery tactics used by licensed digital lending companies.
Before a loan is granted to the borrower, the standards specify the bare minimum obligatory disclosures and key fact statements (KFS), which must include the loan amount approved, annual percentage rates, loan term, installment/lump sum payment amounts with dates, and any fees and charges.
The non-banking financial companies would be expected to communicate these important details to customers via audio, video, emails, and text messages in both English and Urdu. This is important to ensure transparency and ease of understanding, says the regulator. It further stated that any fees not covered by KFS would not be passed along to the borrower.
The new SECP digital lending guidelines will require a licensed digital lender to publish on its lending platform(s) or app(s) its full corporate name and licensing status, ensuring that any advertisement and publication is fair and do not contain any misleading information.
The SECP has also detailed a thorough grievance redressal framework in addition to the current NBFC grievance redressal structure.
Additionally, even with the borrower’s consent, the digital lender will not be permitted access to the borrower’s phone book, contacts list, or photo gallery to protect the data’s confidentiality and privacy, the SECP informed. Other than those who have been specifically authorized by a borrower as guarantors and have also given their authorization to the digital lender at the time of loan acceptance, the rules have also prohibited the lenders from contacting the individuals in the borrowers’ contact lists.