SECP Takes Action Against Illegal Digital Lending Apps: 84 Apps Removed by Google

In response to concerns over illegal digital lending apps, the Securities and Exchange Commission of Pakistan (SECP) has emphasized its efforts to regulate authorized Non-Banking Finance Companies (NBFCs) involved in lending activities. The SECP aims to foster capital and financial market development while promoting ease of doing business and protecting people's rights through transparent law enforcement.

Several NBFCs have expanded into personal loans through digital apps, and the SECP maintains a list of approved apps on its website. However, the SECP warns that all other apps available on various play/app stores are unauthorized and illegal.

To combat this issue, the SECP has collaborated with Google, leading to the removal of 84 illegal lending apps from the Google Play Store.

On April 5, 2023, Google introduced a Personal Loan App Policy for Pakistan, making it the sixth country, following India, Indonesia, the Philippines, Nigeria, and Kenya, to implement additional requirements for digital lending apps.

The SECP has taken steps to protect borrowers' interests since December 2022. It has mandated clear disclosure of fees, loan duration, installment count, and early/late payment charges by NBFCs engaged in digital lending.

Additionally, customer access to personal data is strictly prohibited, and a cooling-off period of 24 hours allows customers to withdraw from loan agreements by repaying the principal amount.

Furthermore, licensing requirements for digital lending involve a two-tier process.

Companies must obtain an NBFC license, which includes evaluations of sponsors and directors, along with the nomination of an independent director.

App approval is granted based on CSAF auditors' certificates, ensuring data and app security.

To address the issue of unlicensed digital lending apps operating illegally, the SECP has collaborated extensively with regulatory bodies such as the Pakistan Telecommunication Authority, Federal Investigation Authority (Cyber Crime Wing), and the State Bank of Pakistan. In June 2022, the State Bank of Pakistan issued a circular denying access to illegal apps through banking/payment channels.

The SECP has launched a media awareness campaign, leveraging mainstream and social media platforms, workshops, and SMS/in-app notifications to educate consumers on data privacy and their rights. The public is encouraged to download only approved digital loan apps. It is advisable to review app permissions, evaluate disclosures regarding fees and policies, and report complaints against licensed apps to the SECP through the dedicated complaint portal on their website. SECP’s website