SECP Announces Strict Limits for Loan Apps and Borrowers
Through its Circular 10 of 2023, the SECP established exposure restrictions on digital lenders and borrowers in order to prohibit abusive practises and safeguard the financial viability of the borrowers in the digital nano-lending sector.
Individual borrowers from a single loan app are only permitted to borrow up to Rs. 25,000, and the total amount of loans from all loan apps combined is only permitted to be up to Rs. 75,000.
Additionally, a nano-loan obtained through a personal loan app can only have a loan period/tenor of up to 90 days. The exposure limitations on borrowers are intended to encourage good lending practises and guard against debt cycles caused by repeated loans.
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Personal loan apps are required to receive a certificate from a Category-I Cyber Security Audit Firm (CSAF) that has been certified by the Pakistan Telecommunication Authority (PTA) in order to assure cyber security and safeguard borrowers’ sensitive data.
Following instructions from SECP, applications will also be required to display a pop-up message prior to the sign-up process to notify users to the terms, conditions, and potential repercussions of borrowing. Additionally required is an in-app calculator for precise loan payback calculations and related fees.
A list of the NBFCs that SECP has authorised to offer personal loans online is available on the SECP website. In order to protect the interests of borrowers, SECP adopted a mandatory requirement for digital lending NBFCs in December 2022. This rule calls for full disclosure of fees, loan terms, payments, and charges.
Companies were expected to abide by ethical and legal norms, including courteous debt collecting practices, and were forbidden from obtaining consumer data.
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Along with limiting illegal and unauthorized apps, the SECP has partnered with Google to create Pakistan’s Personal Loan App Policy on May 31, 2023. In response to SECP’s complaints, Google deleted 84 unlawful lending apps from its Play Store.
SECP is actively reviewing and revising policies to improve financial access and stop deceptive business practises with the goal of protecting investors’ and consumers’ interests.
Potential Cap on APRs
Following thorough, comprehensive coordination and consultation with all relevant parties, including members of the sector, the SECP is now considering imposing pricing limitations on annual percentage rates (APRs) as well as a total cost cap for digital nano loans.
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