Four online lending companies were ordered to shut down by the Securities and Exchange Commission (SEC) for illegally operating business.
The SEC issued a cease and desist order against CashAB, CashOcean, KwikPeso and Little Cash together with their owners CashAB Lending Co., Mimosa Credit Ltd. and Zamoya Credit Ltd.
The companies are alleged of engaging in lending businesses without the necessary license from the corporate regulator.
“The SEC directed the online lending operators, their agents, representatives and promoters, as well as the owners of their hosting sites and all persons acting for and on their behalf, to immediately cease and desist under pain of contempt from engaging in, promoting and facilitating lending activities,” the SEC said in a statement yesterday.
It said these online lending applications access personal information in the mobile phones of borrowers, then use these information to shame the borrower by sending text blasts to contacts to prompt debt payment.
This is in clear violation of several memorandum circulars of the SEC which require lending operators to disclose certain information in their advertisements and prohibit unfair debt collection practices.
The regulator also noted these companies were not granted authority to operate. therefore violating several laws.
One of these is Republic Act No. 9474 or the Lending Company Regulation Act of 2007, which requires that a lending company is established as a corporation and should be granted authority by the SEC. For violating this, persons engaged in the identified companies are punishable with a fine of P10,000-50,000, or imprisonment for six months to 10 years, or both.
Another is Republic Act No. 5980 or the Financing Act of 1998, which prohibits financing companies from operating without authority from the SEC. As punishment, they may be fined P10,000-100,000, or imprisoned for up to six months, or both.
“The Lending Company Regulation Act of 2007 was enacted to prevent and mitigate, as far as practicable, practices prejudicial to public interest,” the Commission En Banc said in the cease and desist order.
“The abusive collection practices, misrepresentations, and unreasonable terms and conditions imposed by the online lending operators and their agents and representatives exemplify the practices that as a matter of policy, the State seeks to prevent,” it added.
Apart from closing shop, the SEC also ordered the identified lenders to stop promoting their business and to delete their promotional materials and their lending applications. — Denise A. Valdez