SEC eyes P100-M capital threshold in plan to lift lending license freeze

THE SECURITIES and Exchange Commission (SEC) is moving to lift its 2021 moratorium on the registration of new online lending platforms (OLPs) and is seeking public feedback on a proposed framework that would require up to P100 million in capital for the largest operations and set a three-year compliance period for existing firms.

Published on March 11, the draft circular seeks to lift the moratorium on new OLPs and introduce a “pay-to-scale” framework aimed at enhancing consumer protection and market stability.

The proposed guidelines link the right to operate digital platforms directly to a company’s paid-up capital. For financing companies (FCs), the requirements are graduated based on the number of apps they manage: P30 million for one OLP, P60 million for two to five, and P100 million for the maximum allowable limit of 10 platforms.

Lending companies (LCs) face a similar but lower-scaled requirement, topping out at P50 million for 10 platforms.

“Subject to full compliance with the requirements prescribed under this circular, the Commission hereby lifts and supersedes MC 10 and allows the disclosure and recording of new OLPs to be owned, operated, or utilized by FCs and LCs. The lifting of the moratorium under this section shall not be construed as an automatic or unconditional approval of any OLP,” the draft circular reads.

THREE-YEAR TRANSITION
Existing firms will not need to meet the requirements immediately but must comply within a three-year transition period. Within 60 days of the circular’s effectivity, all current lenders must submit a “capital compliance plan” outlining how they will meet interim milestones: 30% compliance in the first year, 60% in the second, and full compliance by the end of the third.

For firms that fail to meet these standards by the deadline, the draft provides an exit framework.

“Entities that remain noncompliant after the transition period shall be required to: cease onboarding new borrowers through excess OLPs; submit a discontinuance plan for approval by the Commission; and ensure proper servicing of existing loans under Commission supervision,” the SEC’s draft circular reads. The SEC also warned that it may order the “consolidation, discontinuance, or migration of borrower accounts to compliant OLPs” for noncompliant firms.

ENDING ‘BRAND FRAGMENTATION’
A key pillar of the proposed framework is an anti-circumvention clause that targets the industry practice of “white-labeling” or rebranding multiple apps to evade oversight.

The SEC said it will apply a “substance-over-form” approach to identify integrated platform structures.

“Any attempt to fragment, replicate, rebrand, white-label, or structurally reorganize OLPs for the purpose of avoiding capital requirements, disclosure obligations, or supervisory limits shall constitute circumvention and shall be subject to administrative sanctions,” the draft reads.

Sought for comment, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the guidelines aim to balance consumer protection with market growth.

“[The proposed guidelines are] primarily to protect and uphold the interests and rights of the borrowing public, while providing greater choices and competition for the general public.”

The public has until March 25 to submit comments on the draft before the SEC finalizes the rules, which are currently slated to take effect on April 1. — A.G.C. Magno