If something seems too good to be true, and you suspect there is something wrong with it that you have not detected, it probably is. You should be on the lookout for it instinctively.

This should be the mindset of all Filipinos, especially when it comes to money. Unfortunately, many individuals are easily duped and are drawn to promises that are never realized, allowing unfortunate Juans and Marias to lose their hard-earned funds to fraudsters.

If the loan company is not registered, your transactions are likely illegal.

According to Commissioner Kelvin Lee of the Securities and Exchange Commission (SEC), the obstacles in lending transactions lie in individuals who request loans and are unaware that the amount borrowed came from an unregistered lending organization. People should conduct complete due diligence and verify that the company with which they are transacting is registered with the SEC or has papers qualifying for a Philippines license.

Lee strongly warns the general public to be very wary of financial offers, whether through online apps or offline transactions, that make unbelievable promises and have incredibly easy requirements and terms. 

Overlooking the company's reputation in favor of the tempting interest rates.

There are numerous respectable online lending apps that are well-known for fair lending policies. Check to see if the company is trustworthy and has a solid financial track record to back them up.

Thanks to advances in technology, checking with the SEC about companies and other business entities is now easy with the SEC CheckApp 2.0. “The app and our website, www.sec.gov.ph, gives users access to the SEC’s company database,” Lee noted. 

Privacy concerns.

In addition to harassing borrowers through unfair debt collection, some loan companies also steal personal information. Legitimate online apps will not delve deeper into your privacy as long as you have submitted all of the required requirements and completed all of the essential stages before they approve your loan.

The SEC has jurisdiction over online applications offering loans that fall under the definition of a lending company under Republic Act No. 9474 or the “Lending Company Regulation Act of 2007”. SEC strictly enforces the provisions of the Lending Company Regulation Act of 2007 in that “no lending company shall conduct business unless granted an authority to operate by the SEC”.

SEC also issued the Implementing Rules and Regulations (IRR) of the Financial Products and Services Consumer Protection Act (FCPA) which ensures that appropriate mechanisms are in place to protect the interests of consumers of financial products.

To safeguard consumers from being scammed, the SEC has been aggressive in placing and shutting down these illegitimate lending organizations.

The SEC has already filed more than 70 convictions, banned 60 online lending apps from Google Play and Apple Store, and revoked almost 100 Cease and Desist Orders (CDOs) issued by the SEC with respect to lending apps, totaling more than 2,000 lending company licenses. 

Because of these issues, the SEC declared a moratorium and is responsible for lobbying the BSP for an interest rate cap on consumer loans in 2021.

The majority of the violations stem from establishing a lending organization without the necessary license.

Lee played a pivotal role in the establishment of the SEC’s PhiliFintech Innovation Office in 2021. The office is working under the Commission En Banc’s guidance, focusing on fintech regulation and policy recommendations, positioning the Philippines as a frontrunner in embracing technological advancements while prioritizing investor protection and growth development of the sector of micro small & medium enterprises (MSMEs).

Fintech makes it easier for individual investors to start investing small amounts of money through apps and platforms, such as GCash, Tala, UnionBank Quick Loans, among others. Lee says these provide the benefits of potentially increased savings and even wealth accumulation. Online lending platforms and peer-to-peer lending networks provide alternative modes of securing capital for small businesses and entrepreneurs alike. 

However, the rising usage of fintech (through apps) presents regulatory issues.  As a result, the SEC must adapt, modify, and update its regulations on a regular basis in order to properly cover emerging technologies like as artificial intelligence (AI), blockchain technology, and chatbots, among others, and new technology-powered business models. Nonetheless, the SEC is constantly cautious not to overregulate the fintech area in order not to hamper innovation.