SECP Introduces New Set Of Rules For Online Loan Apps

According to the latest reports, the Securities Exchange Commission of Pakistan (SECP) recently introduced a new set of rules for online loan apps. The basic goal is to impede predatory practices and guarantee the financial sustainability of the borrowers. SECP imposed more rigorous rules for online loan apps by setting maximum limits of loans, loan periods, and restrictions on the use of the debtors’ personal data.

Online Loan Apps Regulated With A New Set Of Rules

Reports claim that a maximum limit of Rs 25000 has been set for individual borrowers from a single loan app. In addition, the aggregate amount of loans from multiple Apps has been restricted not to exceed Rs 75,000. SECP has also restricted the loan period for a nano-loan through personal loan apps to not more than 90 days.

The exposure limits on borrowers will promote responsible lending behaviors and prevent borrowers from being entangled in debt cycles due to multiple loans. In order to ensure cyber security and protect the sensitive data of borrowers, personal loan apps now need to get a certificate from a PTA-approved Category I Cyber Security Audit Firm (CSAF). This is not it. All apps will be bound to display a pop-up alert in accordance with directives from SECP prior to the sign-up process. It is to inform app users about the terms, conditions, and possible ramifications of taking the loan. An in-app calculator for accurate loan repayment calculations and associated charges is also required.

The point worth mentioning here is that many NBFCs licensed by SECP have already cohered personal loans through digital applications, with a list available on the SECP website. The SECP also banned unauthorized and illicit apps a few months ago. It collaborated with Google to introduce Pakistan’s Personal Loan App Policy on May 31, 2023, removing 84 illegal lending apps from its Play Store. It would not be wrong to say that SECP is proactively assessing and acclimating policies to increase financial access and deprive manipulative business practices sought to safeguard the interests of consumers as well as investors.

SECP is also thinking of imposing pricing caps on APRs as well as a total cost cap on digital nano loans. They want to take this step after all-inclusive consultation and coordination with stakeholders, including industry parties.

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