SEC move to end freeze on new online lending firms draws cautious support

By Alexandria Grace C. Magno, Reporter

THE Securities and Exchange Commission’s (SEC) move to lift its 2021 moratorium on new online lending platforms (OLPs), alongside proposed stricter capital and compliance requirements, is drawing cautious support from industry players, amid concerns over enforcement and regulatory consistency.

Global Dominion President and Chief Executive Officer Patricia Poco-Palacios said the moratorium addressed earlier concerns about lending practices, and lifting it with stricter requirements could help strengthen industry regulation and consumer protection.

“I think the intent behind lifting the moratorium, paired with strong regulatory safeguards, reflects an advancing approach to financial regulation in the Philippines — and that is a welcome development,” she told BusinessWorld in an e-mail.

“What really matters is that the requirements are applied consistently and that new entrants are held to the same standards from day one,” she added.

The SEC imposed the moratorium in November 2021 on the registration of new online lending platforms run by financing and lending companies as it worked on rules to curb predatory lending and abusive debt collection practices.

This year, the SEC is moving to lift the moratorium and sought public feedback, which ended on March 25, on a proposed framework requiring up to P100 million in capital for the largest operations and a three-year compliance period for existing firms.

Published on March 11, the SEC’s draft circular seeks to lift the moratorium on new OLPs and introduce a “pay-to-scale” framework aimed at enhancing consumer protection and market stability.

Moritz Gastl, general manager at Tala Philippines, said stronger enforcement against unregistered lenders, copycat applications, and abusive collection practices will be needed once the moratorium is lifted.

“Social impact-driven fintech companies, like Tala, and regulators must work hand in hand to balance responsible innovation and consumer protection, so new players should be strictly screened to ensure their operations will truly improve Filipinos’ quality of life beyond access to credit,” he told BusinessWorld in a separate e-mail.

On the proposed capital threshold, Mr. Gastl said higher capital requirements indicate a maturing industry and may help filter out bad actors, but he added that stricter oversight of collection agencies and broader coordination on borrower protection will also be needed to improve trust.

He also noted that rising living costs and stagnant incomes are driving demand for reliable credit, adding that transition measures should ensure continued supply.

“Clear and predictable regulations allow us to factor them into our business and focus on providing credit to underserved Filipinos,” he added.

“As long as new rules do not impose disproportionate administrative burdens on reputable companies nor disrupt legitimate business operations, Tala will gladly satisfy capitalization requirements,” Mr. Gastl said.

“We also hope that processing times and licensing fees are in line with our Southeast Asian neighbors to ensure regional competitiveness.”

The draft circular links the right to operate digital platforms directly to a company’s paid-up capital.

For financing companies, the requirements are graduated based on the number of apps they manage: P30 million for one OLP, P60 million for two to five, and P100 million for the maximum allowable limit of 10 platforms.

Lending companies face a similar but lower-scaled requirement, topping out at P50 million for 10 platforms.

The Commission will also grant existing financing and lending companies a three-year transition period to comply with revised paid-up capital requirements and require affected entities to submit a compliance plan within 60 days of the circular’s effectivity.

Ms. Poco-Palacios said stricter requirements could help level the playing field, adding that the three-year transition period for capital increases appears manageable for operators.

“At the end of the day, those of us who have invested in compliance, in people, and in responsible lending practices should welcome a higher bar because it distinguishes us from those who are exploiting regulatory gaps,” she said.

“Ultimately, more responsible players in the online lending space mean more Filipinos gaining access to credit. And access to credit, when delivered responsibly, is transformative,” Ms. Poco-Palacios noted.