ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Wednesday restricted the digital lending platforms from taking coercive measures for recoveries and barred them from shifting borrowers’ data outside Pakistan.

The SECP through circular no. 15 has directed the digital lenders that the borrowers’ data cannot be stored on any cloud infrastructure outside the jurisdiction of Pakistan.

The commission has also issued digital lending standards applicable to Non-Banking Finance Companies (NBFCs) undertaking lending activities through digital channels/mobile applications (apps).

The regulator has announced these measures amid growing complaints from the public that the digital lending platforms were involved in mis-selling, breach of data privacy and coercive recovery practices.

Regulator bars firms from storing data on cloud outside Pakistan

The circular has been forwarded to licenced digital lending companies and placed on the SECP website for public consumption and awareness.

The SECP has made it mandatory that the lending app will have to display the summary of the Key Fact Statement (KFS) through a video/audio, screenshot and email/SMS in both English and Urdu languages.

This move aims to ensure transparency and ease of understanding, while the lending companies need to stipulate minimum mandatory disclosures and provisions, before loan disbursement to the borrower.

These include loan amount approved, annual percentage rates, tenor of loan, installments/lump sum payment amounts with date, and all charges. Any fee not included in KFS will not be charged to the borrower.

At the same time to discourage non-licenced operators, the licenced digital lender shall be required to disclose its full corporate name and licencing status on its lending platform/app, and ensure that any advertisement and publication shall be fair and not contain misleading information.

The SECP has also specified a comprehensive grievance redressal mechanism over and above the current NBFC grievance redressal framework.

Further, to ensure the confidentiality and privacy of data, the digital lender will not be allowed access to the borrower’s phone book or contact list, or photo gallery, even if the borrower has given consent in this regard.

The circular has restricted the lenders not to contact the persons in the borrower’s contact list, other than those who have been specifically authorised by the borrower as guarantors and who have also provided their consent to the digital lender at the time of loan approval.

Recently the Competition Commission of Pakistan (CCP) has taken notice of violations and deceptive marketing by the mobile applications offering nano personal loans and asked the aggrieved people to lodge their complaints to the CCP in this regard.

Published in Dawn, December 29th, 2022