Online loan apps: SECP imposes pricing caps

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has imposed pricing caps on online apps and digital platforms offering personal loans, ARY News reported on Monday.

In a significant move towards promoting responsible lending and consumer safety, the Securities and Exchange Commission of Pakistan (SECP) issued an all-encompassing set of requirements for Non-Banking Financial Companies (NBFCs) offering digital personal loans via mobile applications, a press release said.

The requirements set a maximum limit for the profit rate that can be charged by a nanolender to the borrower.

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The total cost cap for nanoloans will encompass all associated fees, including processing charges, service fees, verification fees, loan handling fees, interest charges, late payment penalties, and any other applicable charges. The cumulative price of a loan shall not exceed the aggregate amount of the principal loan amount.

Moreover, limits have been set for loan rollover. To ensure the uniformity and standardization for the profit rate calculation formulas and brief illustration has been specified in the circular issued by SECP.

SECP is actively evaluating and adapting policies to improve financial access and combat manipulative business practices. The measures, developed through consultation with stakeholders and industry participants, aim to balance financial inclusion and consumer protection against excessive debt burden, it read.

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In August, the Securities Exchange Commission of Pakistan (SECP) has introduced a new set of rules for online loan apps to curb predatory practices and ensure the financial sustainability of the borrowers.

The Securities Exchange Commission of Pakistan (SECP) imposed stricter rules for online loan apps by setting maximum limit of loans, loan period, restriction on use of the debtors’ personal data and others.

In order to curb predatory practices and ensure financial sustainability of the borrowers in the digital nano-lending sector, the SECP has imposed exposure limits on digital lenders and borrowers, a press release read.

A maximum limit of Rs25000 has been imposed for individual borrowers from a single loan app, and the aggregate amount of loans from multiple Apps has been restricted to not exceed Rs75,000.

Moreover, the loan period for a nano-loan through personal loan apps has been restricted to not more than 90 days.

The exposure limits on borrowers shall promote responsible lending behaviours and prevent borrowers from being trapped in debt cycles due to multiple loans.

In a bid to ensure cyber security and protect sensitive data of borrowers, condition has also been imposed whereby personal loan apps must obtain a certificate from a PTA-approved Category I Cyber Security Audit Firm (CSAF).

Additionally, prior to the sign-up process, apps will be obligated to display a pop-up alert in accordance with directives from SECP to inform app users about the terms, conditions, and potential ramifications of borrowing.