SECP launches action against illegal digital lenders

ISLAMABAD:

The Securities and Exchange Commission of Pakistan (SECP) has taken action against companies that loot people through illegal mobile apps offering cheap and fast loans at high interest rates.

The regulator has referred the case against 14 illegal apps to the Federal Investigation Agency (FIA) for filing a lawsuit and also moved to change rules allowing licensed companies to digitally provide loans to the public.

The SECP told The Express Tribune that many national and international companies were involved in the case, adding that they began to act when they received complaints.

The companies under investigation are Flexi Money, Hazir Loan, Credist, Fori Money, Fast Cash, Mr Loan, V Cash and Mera Rupee. Most of them are foreign companies with front men in Pakistan. They have false addresses and are illegally using the SECP name. They also use different VPNs to communicate with people while hiding their location.

They lure people by offering loans of up to Rs 50,000 for 90 days and give them loans of Rs 2,000 to 3,000 for a week, charging up to 200% interest and service charges.

According to the SECP, the FIA ​​is working on the issue and actively tracking Pakistanis who operate these illegal apps by tracing their offices, phone numbers and email addresses used for these crimes.

The SECP spokesperson said that they have introduced digital lending in the country legally and the industry is doing well, adding that eight companies are licensed, two of which provide small loans while six others provide other types. loans, including business loans.

However, the spokesperson noted, a Chinese company and another Pakistani company were providing small loans and as the former had one mobile app, the latter had two. He added that they had received 800 complaints against the two companies’ apps, and that those complaints had been repaired, with some people’s loans canceled.

He added that they had also received complaints about these companies hiring agents for loan collection and obtaining other information including users’ contact list, a move that had been banned.

In response to a question, the spokesperson said that digital loans had grown by 1,100% in one year and that these two companies had provided small loans amounting to Rs 13 billion to the public, the rate of return being 90%.

He said that due to the opportunities in this sector, other companies are also pursuing him and that the SECP currently has 40 applications for licenses, but they are no longer issuing licenses due to the complaints against the two companies.

He said they had decided to make the digital lending rules stricter by changing them for public safety and to prevent abuse, after which new licenses would be issued.

The spokesperson said that due to lack of awareness, people used to take loans through mobile apps and fail to repay the lenders, due to which the interest burden was increasing for them. However, those who repaid their loans on time had no problems, he added.

He said that despite this, they are changing the rules and action is being taken against those who operate illegal apps.

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