A CODE OF ethics for online lenders has been created to safeguard borrowers from abusive practices of financial technology (fintech) players such as shaming them in times of default and late payments and to foster transparency for both creditors and borrowers.
FinTechAlliance.ph, an organization of fintech and digital firms, partnered with regulators and government agencies such as the National Privacy Commission (NPC), Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), the Anti-Money Laundering Council’s Secretariat, Bureau of Internal Revenue (BIR), Department of Trade and Industry (DTI) and the Insurance Commission to craft “an industry standard on consumer protection, governance, compliance, data privacy, security, and digital literacy.”
Under the initiative, online lenders that are alliance members will be required to fully disclose all costs for customers, including interest rates, processing fees, and fines for late payments, Angelito “Lito” M. Villanueva, chairman of FinTech Alliance and chief innovation and inclusion officer at Rizal Commercial Banking Corp., said during Monday’s launch event.
“‘TechnoEthics’ is a framework on the ethical utilization of emerging technologies, protecting consumers against the misuse and abuse of innovations, and adoption of common principles to guide players about new advances in technological development and application to benefit society,” Mr. Villanueva said.
Aside from the development of the code of ethics, Mr. Villanueva said they are asking regulators such as the NPC, SEC, and BSP to publish a list of legitimate online lenders adhering to the ethical guidelines on their websites.
“In a way, this is similar to what POEA (Philippine Overseas Employment Agency) when they provide a list of all legitimate recruitment agencies…to ensure that the agencies you are transacting are legal and legitimate,” he said.
According to FinTech Alliance, there have been several cases of “public shaming” of borrowers who default on their payments by web-based and mobile lending firms.
“Without looking and reading the ‘fine prints,’ online borrowers agree to the loan terms upon application including lender’ access to its contact list,” the group said in a statement.
The NPC has received over 5,000 harassment complaints filed by customers against online lenders.
Pia Bernadette Roman-Tayag, head of the Bangko Sentral ng Pilipinas’ Inclusive Finance Advocacy Staff, welcomed the development, saying this is “very much aligned” with the central bank’s policy to promote financial inclusion with “some basic tenets of consumer protection.”
Ms. Roman-Tayag said customers should be aware of the financial services they are accessing, especially lending rates.
“This is what we call product suitability so they don’t access products that maybe they cannot afford, or maybe they cannot…benefit from…. [They] also have to be able to compare across providers so that they can make their best decision,” she said during the briefing on Monday.
In addition, consumers should also know the institutions they transact with in case they need to complain against them, the BSP official said.
“If anything goes wrong, that (where to file complaint) is clear to them. Who they are customers of, especially in fintechs now, the provider could be different from the delivery channel, which could be different from the marketing provider. These are basic protection principles that we require our supervised institutions,” Ms. Roman-Tayag said.
NPC Commissioner Raymund E. Liboro also expressed support for the adoption of the code of ethics.
“Through this, we expect fintech companies to be more prudent and responsible in processing their clients’ personal data and succeed in achieving financial inclusivity for the country,” Mr. Liboro said.
There are over 124 fintech lenders operating in the country, of which 75 are mobile apps, 40 are web-based and five traditional brick-and-mortar players that have tech platforms. Among these lenders, only half are registered with regulators, the alliance said.
On Sept. 12, the SEC issued a cease and desist order against 19 online lending apps operated by unlicensed persons and entities after complaints for invasion of privacy and harassment, according to SEC Commissioner Kelvin Lester K. Lee.
“The order…covers Instant Pera, QuickPera, Lendmo Philippines, Binixo, CashBus, CashCat, Cashuttle, Crazy Loan, Flash Cash, Happy2Peso, Hatulong, MeLoan, MoneyTree Quick Loan, Pera Express, Pera4u, Peramart, PesoLending, QuickPeso, and Umbrella,” Mr. Lee said during the press conference. — L.W.T. Noble