SEC orders closure of 6 online lending firms

By James A. Loyola

The Securities and Exchange Commission (SEC) has issued another cease and desist order covering six online lending operators as part of its campaign to stamp out illegal lending activities.

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The Commission En Banc issued the order for the operators and owners of Batis Loan, Happy Credit, Easy Cash, Wahana Credit & Loan Corp., PesoMaMa and Light Kredit to immediately cease and desist under pain of contempt from engaging in, promoting and facilitating unauthorized lending activities.

The SEC also ordered the online lending operators to cease from offering and advertising their lending business through the internet and to delete or remove promotional presentations and offerings of such lending business from the internet including the lending applications that they operate.

Section 4 of Republic Act No. 9474, or the Lending Company Regulation Act of 2007, requires that a lending company be established only as a corporation. It further provides that “no lending company shall conduct business unless granted an authority to operate by the SEC.”

Certifications issued by the Commission’s Company Registration and Monitoring Department (CRMD) showed that Batis Loan, Happy Credit, Easy Cash, Wahana Credit & Loan Corp., PesoMaMa and Light Kredit were not registered as corporations or partnerships.

The CRMD further attested that the online lending operators were not issued the necessary certificates of authority to operate as lending companies nor had pending applications for such.

Investigations by the SEC Enforcement and Investor Protection Department (EIPD) confirmed the existence and operation of the online lending applications, which have been advertising on social media.

The EIPD further found that the online lending operators have gained access to personal information stored in borrowers’ mobile phones, including social media accounts, contact numbers and email addresses, through their mobile applications.

The online lending operators then used such information to exact prompt payment. They would send a text blast to the borrower’s contacts to inform them about the borrower’s indebtedness and his/her supposed refusal to pay the amount due.

In other cases, the borrower would be threatened with legal action or public shaming.

“Considering that these Online Lending Operators are not incorporated entities or have no Certificate of
Authority to Operate as Lending Companies or Financing Companies, the lending activities and transaction are illegal and must be immediately stopped by this Commission,” the cease and desist order read.

It added that, “the abusive collection practices engaged in by unlicensed online lending companies constitute unfair debt collection practices which are expressly prohibited under SEC Memorandum Circular No. 18, Series of 2019 (Prohibition on Unfair Debt Collection Practices of Financing Companies and Lending Companies).”