The Securities and Exchange Commission (SEC) is looking at requiring online lending companies to have at least five directors of which at least two are independent, before they can apply for a license to operate.
The requirement is part of a policy overhaul the securities market regulator is looking at to better police the online lending business in the country.
Interested parties need to secure registration and prior approval from the SEC before they can operate.
In registering the business, the company’s ability to engage in financial technology must be included in its purpose as stated in its articles of incorporation.
The SEC said the company is also required to submit a detailed business and operational plan regarding its compliance to the Truth in Lending Act (TILA) or RA3765, and the agency’s requirements on advertisements of financing companies and lending companies and reporting of online lending platforms.
The company must show compliance on provisions in the prohibition on unfair debt collection practices of financing companies and lending companies, and the Credit Information System Act (RA9510), among others.
It is also required to provide a walk-through of its online lending platform simulating actual user experience, its complaint-handling process, and a discussion on the extent of data to be collected by the platform and how they will be handled.
Under the draft guidelines, the online lending platform’s license shall have an initial validity of one year from the issuance date, subject to periodical examination and renewal by the SEC.
“The validity of the license will depend on the financing or lending company’s compliance with reportorial requirements,” the SEC said.
Companies who have an existing online lending platform meanwhile who who wish to operate an additional platform will have to apply anew for the prospective online lending platform.
The SEC early this month announced a moratorium on the registration of new online lending platforms for financing and lending companies pending the approval of a new rule on the platform’s licensing and registration. The SEC has cancelled the licenses of 35 financing/lending companies due to various violations of applicable rules and regulations to date.
Another 2,081 lending companies had their certificate of registration revoked for their failure to secure the requisite certificate of authority, under the Lending Company Regulation Act of 2007.
“Moreover, 58 online lending applications have been ordered to cease operations for lack of authority to operate as a lending or financing company,” it said.
