What will it take for Aamir Khan at SECP to act against predatory lenders?
What will it take for Aamir Khan at SECP to act against predatory lenders?
While in the rest of the world, regulators including India are penalizing and even shutting down those who rip off consumers, SECP is actively facilitating such apps.
India Shining
It pains me to say this but Indian regulators are leaving Pakistani regulators behind. At least in India, there is realization amongst the regulators of the dangers of these apps. The recent ED press release in India.
See the highlighted part of the recent decision by the Enforcement Division. This is exactly what Pakistani fintech apps are doing and instead of cracking down on them, In Pakistan, SECP is laying down the red carpet.
Pak fintechs breaking every rule in the rule book
First a few example of deceptive practices of these apps.
Example 1: Deceptive marketing
Example 2: White Lie Marketing
Example 3: Threats and Harassments
Example 4: Threats and harassment continues
Example 5: Fake reviews
Example 6: Using SECP Logos
Yet SECP continues to lay down the red carpet
When all of this was brought to SECP, what did SECP do. It met with the very fintechs and then issued a PR on their behalf saying unregulated fintechs are bringing a bad name when in most cases, its the regulated ones that are most responsible
I covered all this and more here
But reportedly, either SECP or someone in SECP is very keen that all these predatory lenders get approved and start ripping off Pakistanis
When the entire business model of these apps rely on deceptive marketing, threats and harassment, the maximum SECP could come up with was to ask these apps for self governance.
Mein Kahan ja kar apna sar phorhoon
International examples of what regulators do for clamping down deceptive practices
US
Opendoor Got Hit With a $62 Million Fine for 'Misleading' Customers (businessinsider.com)
The FTC detailed why Opendoor's marketing materials were deceptive in a 14-page report that included screenshots of Facebook ads and website charts of costs shown to customers. The FTC said this evidence seemed to promise consumers they would make more money by selling to Opendoor because all fees were bundled together into one amount. In reality, they often paid more than they would have selling their homes via a real-estate agent.
"Opendoor promised to revolutionize the real-estate market but built its business using old-fashioned deception about how much consumers could earn from selling their homes on the platform," Samuel Levine, the director of the FTC's Bureau of Consumer Protection, said in a statement the commission provided. "There is nothing innovative about cheating consumers."
Read the bold parts again. This is what exactly the fintech apps are doing. Using websites and Youtube ads deceptive materials.
CFPB Shutters Lending by VC-Backed Fintech for Violating Agency Order
Today, the Consumer Financial Protection Bureau (CFPB) announced that LendUp Loans has agreed to halt making any new loans and collecting on certain outstanding loans, as well as to pay a penalty, to resolve a September 2021 lawsuit alleging that it continued to engage in illegal and deceptive marketing in violation of a 2016 CFPB order. The lawsuit also accuses LendUp of violating fair lending regulations.
“LendUp was backed by some of the biggest names in venture capital,” said CFPB Director Rohit Chopra. “We are shuttering the lending operations of this fintech for repeatedly lying and illegally cheating its customers.”
LendUp misrepresented the benefits of repeatedly borrowing from the company by advertising that borrowers who climbed the LendUp Ladder would gain access to larger loans at lower rates when, in fact, that was not true for tens of thousands of consumers.
India
Indonesia
Indonesia seeks to crack down on "unhealthy" peer-to-peer lenders | Reuters
JAKARTA, July 22 (Reuters) - Indonesia has launched a crackdown on peer-to-peer (P2P) lenders through a new regulation and capital requirements, in a move that industry sources say should help clean up a booming online lending sector beset by consumer complaints.
Since 2015, foreign online lenders, including many Chinese lenders, have targeted Indonesia's youthful market of 270 million people, but some "ghost" online lenders have not had physical offices and used aggressive debt-retrieval practices, such as calling the families and colleagues of clients.
Meanwhile in Pakistan.
It would be helpful for SECP to inquire from these apps as how they expect to lend money without using deceptive marketing practices and recover money from the borrowers without resorting to threats and harassment.