ISLAMABAD: The Secu­rities and Exchange Commis­sion of Pakistan (SECP) has advised borrowers to review the legal status of digital applications before signing up for loans, as Google introduced a new policy to protect Pakistani consumers from fake loan apps.

After an extensive commission meeting, the SECP stated on Wednesday that borrowers should read and evaluate the disclosures regarding fees, late payment charges, loan tenor, cooling-off period, and the privacy policy of applications before signing in.

“Users are also advised to report complaints against licensed apps to SECP through the dedicated complaint portal at SECP’s website,” the commission said.

The SECP said that to address the issue of unlicensed digital lending apps operating illegally in the country, extensive liaison has been made with various regulatory bodies, including the Pakistan Telecommu­nication Authority (PTA), Federal Investigation Authority’s (FIA) cybercrime wing, and the State Bank of Pakistan (SBP).

Awareness campaign launched on data privacy; Google’s new policy to safeguard consumers from ‘fake’ loan apps

As a result, the SBP issued a circular in June 2022, denying access to illegal apps to banking/payment channels. The SECP is the regulator of Non-Banking Finance Companies (NBFCs) digital apps.

The SECP noted that a media awareness campaign was also launched to educate consumers on data privacy and their rights, involving mainstream and social media, capacity-building workshops, and SMS/in-app notifications.

“To combat the menace of illegal apps, the SECP has been actively engaged with Google, which on April 5, 2023, announced its Personal Loan App Policy for Pakistan, effective from May 31, 2023,” a spokesperson for the SECP said.

Pakistan is the sixth country in the world, after India, Indonesia, the Philippines, Nigeria, and Kenya, for which Google has introduced additional requirements for digital lending apps.

The policy contains checks and balances to avoid listing illegal apps on the Play Store and sets stringent requirements to minimise access to consumers’ personal data.

Google has removed 84 illegal lending apps reported by the SECP from its Play Store.

Besides, the scrutiny audit certifications have been enhanced for licensed digital apps.

For companies that want to engage in digital lending, SECP follows a two-tier process. They have to obtain a licence to form an NBFC, which involves due diligence, including a fit and proper evaluation of sponsors and directors and the nomination of an independent director on the board, along with a minimum equity requirement.

Google announces new policy

Earlier, Google announced a new policy to protect consumers in Pakistan from fake and unregistered loan apps.

The new requirements, effective from May 31, 2023, allow the NBFC lender to publish only a single Digital Lending App (DLA).

Those who attempt to publish more than one DLA will be terminated from their developer account and any other associated accounts.

Developers with personal loan apps targeting users in Pakistan must complete the Personal Loan App Declaration form and submit the necessary documentation before publishing their app.

They must submit proof of approval from the SECP to offer or facilitate digital lending services in Pakistan.

Google Play will also request additional information or documents related to loan app compliance with the applicable regulatory and licensing requirements.

Personal loan apps operating in Pakistan without proper declaration and licensed attribution will be removed from the Play Store.

Developers must immediately remove the app from the Google Play Store if the submitted licence, registration, or declaration is no longer valid under the applicable laws.

Farhan S. Qureshi, Google’s Director for Pakistan, said, “Google is taking preventive measures by setting stringent requirements for DLA to reduce financial risk and ensure data privacy.”

Google stated that the new requirements imposed on developers of personal loan apps will provide an extra layer of protection for users.

Under the new set of rules, a DLA is prohibited from accessing sensitive data, such as external storage, media images, contacts, and fine location.

Apps offering short-term personal loans, requiring repayment in full within 60 days from the loan issue date, are not allowed.

Pakistan is one of a small group of countries where Google has implemented additional requirements for DLAs.

The new policy update is a significant step towards safeguarding consumers from harmful financial practices and ensuring data privacy.

Published in Dawn, July 20th, 2023