SEC drafts guidelines for online lending platforms

Published November 21, 2021, 7:55 PM

by James A. Loyola

The Securities and Exchange Commission (SEC) has issued the draft guidelines for the registration and operation of online lending platforms (OLPs) as part of its efforts to stop abusive and predatory practices.

The Commission released for public comment the draft guidelines on November 19, following the imposition of a moratorium on the registration of new OLPs on November 5.


The proposed guidelines will apply to both existing and newly registered financing and lending companies who have yet to own, operate or utilize OLPs and other modes of financial technology (fintech), as well as those who are already engaged in fintech, who look to provide their credit products and related services.

Under the proposed guidelines, no financing or lending company will be allowed to own, operate, or use OLPs or engage in fintech without registration and prior approval by the SEC.

The company’s ability to engage in fintech must also be included in its purpose as stated in its Articles of Incorporation.

Further, the names of the OLPs shall be registered as business or trade names of the financing or lending company, pursuant to SEC Memorandum Circular No. 13, Series of 2019, which provides the Amended Guidelines and Procedures on the Use of Corporate and Partnership Names.

Aside from being duly registered and licensed as financing or lending companies, applicants for an OLP license must also have at least five directors and at least two independent directors, or such number that that will constitute 20 percent of the members of the board of directors, whichever is higher.

The applicant should submit certain documents to the Commission, including a detailed business and operational plan containing the company’s compliance with the Truth in Lending Act (TILA), and SEC Disclosure Requirements on Advertisements of Financing Companies and Lending Companies and Reporting of Online Lending Platforms.

Further, the applicant financing or lending company must show compliance with the Prohibition on Unfair Debt Collection Practices of Financing Companies and Lending Companies; the Credit Information System Act; and the Requirement for Corporations, Partnerships, Associations, and Individuals to Create or Designate E-mail Account Address and Cellphone Number for Transactions with the Commission.

The SEC Corporate Governance and Finance Department (CGFD) will then evaluate the documents submitted by the applicant company.

The financing or lending company will then present its business and operational plan as well as its marketing strategy, target market, interest rates, loan products, and services before a panel of representatives from the SEC.

The financing or lending company will likewise provide a walk-through of the OLP simulating actual user experience, its complaint-handling process, and a discussion on the extent of data to be collected by the OLP and how they will be handled.

The SEC panel will then submit its recommendation to the Commission En Banc, who will decide on whether to grant or deny the application.

The Commission En Banc’s decision will be considered final. Rejected financing and lending companies may reapply after one year and should demonstrate that the reason for rejection no longer exists.

Under the draft guidelines, the OLP license shall have an initial validity of one year from the issuance date, subject to periodical examination and renewal by the SEC.