The Securities and Exchange Commission of Pakistan (SECP), taking notice of rising concerns involving mis-selling, breach of data privacy, and coercive recovery practices of licensed digital lending companies, has issued directives to safeguard the public interest and ensure fair treatment of borrowers in the digital lending ecosystem.
Through Circular No. 15, SECP has issued digital lending standards applicable to Non-Banking Finance Companies (NBFCs) undertaking lending activities through digital channels / mobile applications (Apps).
The requirements stipulate minimum mandatory disclosures and provision of Key Fact Statement (KFS), before loan disbursement to the borrower. These include the loan amount approved, annual percentage rates, the tenor of loans, installments/lumpsum payment amounts with date(s), and all fees and charges.
To ensure transparency and ease of understanding, the App shall display the summary of KFS through a video/audio, screenshot, and email/SMS in both English and Urdu languages.
Any fee not included in KFS will not be charged to the borrower. To discourage non-licensed digital lenders, the licensed digital lender shall be required to disclose its full corporate name and licensing status on its lending platform(s)/App(s), and ensure that any advertisement and publication shall be fair and not contain misleading information.
In addition, SECP has also specified a comprehensive grievance redressal mechanism over and above the current NBFC grievance redressal framework.
Further, in order to ensure the confidentiality and privacy of data, digital lenders will not be allowed access to the borrower’s phone book or contacts list, or photo gallery, even if the borrower has given consent in this regard.
The lender shall also not be allowed to contact the persons in the borrower’s contact list, other than those who have been specifically authorized by the borrower as guarantors and who have also provided their consent to the digital lender at the time of loan approval.
Moreover, the data shall not be stored on any cloud infrastructure outside the jurisdiction of Pakistan.
