SEC CDO Case No. 09-19-055 In the matter of: CASHWOW. ENFORCEMENT AND INVESTOR PROTECTION DEPARTMENT, Movant.

Securities and Exchange Commission Republic of the Philippines Depariment of Finonct

COMMISSION EN BANC

IN THE MATTER OF CASHWOW

SEC CDO Case No 09-19-055

PROTECTION DEPARTMENT, ENFORCEMENT ANDINVESTOR Movant. Y

RESOLUTION

(CASHWOW) through counsel, Atty. Clarence D. Alcordo praying that the Cease and Desist Order dated 20 September 2019 (Assailed CDO) be lifted, filed on 25 September 2019 by Cashwow/Hupan Lending Technology, Inc. the dispositive portion reads: This resolves the Motion to Lift Cease and Desist Order (Motion to Lift)

agents, representatives and promoters, as well as the owners of the hosting behalf are hereby ordered to IMMEDIATELY CEASE AND DESIST UNDER PAIN OF CONTEMPT from engaging in, promoting and facilitating such unauthorized lending activities/transactions. CASHAFIN; CASHFLYER; CASHMAYA; CASHOPE: CASHWARM; CASHWOW; CREDITPESO; ET EASY LOAN; and PESO2GO, their sites of these Online Lending Operators and all persons acting for and on their following online lending applications: CASH` WHALE; CASH 100; "WHEREFORE, premises considered, the operators and owners of the

THE FACTS

its mobile applications, CASHME and CASHWOW. Company Registration No. CS201901197. Its principal office address is Bel-Air, Makati City. It is engaged in the business of online lending through located at Room 303, Executive Building, 369 Jupiter Corner Makati Avenue. Hupan Lending Technology, Inc. (Hupan) is a lending company with

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On 20 September 2019, the Commission issued the Assuiled CD0 against CASHWOW among others directing it to immediately cease and desist from engaging in, promoting and facilitating such unauthorized lending

the following substantial grounds: activities/transactions. Aggrieved, CASHWOW filed on 25 September 2019 a Motion to Lift praying that the Commission lifts the Assailed CDO based on

I Cashwow was not operating without the required Certificate of

H. Cashwow cannot confirm nor deny the Commission of Incorporation and Certificate of Authority to operate as a Lending Company;

I. Cashwow did not violate the right to privacy of debtors. unreasonable and abusive lending and collection practices;

the Enforcement and Investor Protection Department (EIPD) was also given was given ten (10) days from the date of hearing to file its Comment. Then the same period to file its Reply Comment. the grounds alleged in its motion. After the parties' oral arguments, Hupan During the scheduled hearing on the Motion to Lift, Hupan reiterated

file any Reply Comment. Hupan filed its Position Paper on 14 October 2019. The EIPD did not

Lift was terminated and submitted for resolution on 28 October 2019. With no remaining issues to be clarified, the hearing on the Motion to

ISSUE

sufficient grounds or evidence to overcome the findings in the Commission's Cease and Desist Order. The issue to be resolved is whether or not Hupan/Cashwow presented

RULING

We find the instant Motion to Lift bereft of merit.

not have the requisite Certificate of Authority to Operate as a Lending Company from the Commission. The Assailed CDO was based on EIPD's findings that CASHWOW do

(1) A Memorandum dated 16 September 2019 from the Corporate In support of the said findings, EIPD presented the following evidence

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collection of charges and fees, and violate the right to privacy of debtors. Governance and Finance Department (CGFD), showing a list of Online websites/facebook accounts/online applications most of which do not state the name of the corporations or entities operating them; (3) Copies of the complaints received by the CGFD alleging that the online lending operators unreasonable terms and conditions, make misrepresentations as to non- Lending Applications which have not been issued Certificates of Authority to Operate as Lending Companies or Financing Companies; (2) screenshot of impose and charge high interest rates, unilaterally implement onerous and

Authority No. 2879 issued on 23 January 2019 by the Commission in favor of Hupan. application owned and operated by Hupan and which was launched in Google Play Store last 01 July 2019 pursuant to and on the basis of the Certificate of In Hupan's Motion to Lift, it stated that CASHWOW is a mobile

advertising CASHME, the first mobile application of Hupan. However, during its first few weeks of operations, Hupan could not register CASHWOW mobile application under its name for unknown reason. As a remedy, Hupan disclosed its ownership of CASHWOW mobile application in its Credit Agreement. CASHWOW was developed to address the increasing cost in

Incorporation. Memorandum Circular (MC) No. 19 series of 2019 (Disclosure Requirements online lending platforms owned/operated/utilized by the Company. The as a business name of the Company as provided in its Amended Articles of Reporting of Online Lending Platforms) which requires full disclosure of the Affidavit of Compliance (SEC Form 1- Existing Online Lending Platforms) submitted on 10 October 2019 states that Hupan have registered CASHWOW issued to Hupan. We also note that Hupan already complied with SEC on Advertisements of Financing Companies and Lending Companies and We note the Certificate of Authority to Operate as a Lending Company

establish, operate and maintain an online lending application. A prior approval Company does not mean that it was automatically granted the authority to by the Commission is necessary for this purpose. However, the fact that Hupan has a CA to Operate as a Lending

Company Regulation Act of 20071, "No lending company shall establish or approval by the SEC. operate a branch, extension office or unit or satellite office without prior Pursuant to the Implementing Rules and Regulations of the Lending

1 REPUBLIC ACT NO. 9474

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as separate from Hupan's in-store/physical lending office. The AOI of Hupan did not mention any lending activity via internet. An online lending application such as CASHWOW should be treated

application without prior approval of the Commission, it committed "serious misrepresentation as to what the corporation can do or is doing to the great Registration of a corporation. prejudice of or damage to the general public.2n Such misrepresentation is so grave that it warrants the suspension or revocation of the Certificate of Thus, when Hupan established and operated CASHWOW online

unreasonable terms and conditions in the conduct of its lending activities, we abusive collection practices, misrepresentations, find the same unmeritorious. As for Hupan's argument in its Motion to Lift that it has not engaged in nor has it issued

collectors. These collectors get paid on commission basis only when they abuses and employment of unfair means of collection. Nevertheless, Hupan is working on its policies to improve the manner of collecting borrower's debts. have successfully collected payment from the borrowers. This resulted to During the hearing, Atty. Alcordo stated that Hupan is using third party

provides that Financing Companies (FCs) and Lending Companies (LCs) may Collection Practices of Financing Companies and Lending Companies) outsource the conduct of collection to third party service providers (TPSPs) which shall be regarded as agent of the FCs and LCs. The ultimate responsibility in ensuring that collection practices are fully compliant with this Circular remain with the FCs and LCs. Section 3 of SEC MC No. 18 series of 2019 (Prohibition on Unfair Debt

Article 1868 of the Civil Code of the Philippines which provides that: "By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent and authority of the latter." The foregoing is based on the concept and nature of agency under

have the same legal effect and consequence as though the principal had been the one so acting in the given situation. the principal insofar as the world is concerned. Consequently, the acts of the agent on behalf of the principal within the scope of the delegated authority Court held that when an agency relationship is established, the agent acts for In Eurotech Industrial Technologies, Inc. v. Cuizon3, the Supreme

3 550 Phit. 165 (2007). See also Rallos v. Felix Go Chan & Sons Realty Corporation, 171 Phil. 222 (1978] 2 Section 6 (I) (2) of Presidential Decree No. 902-A

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For an agency to arise, it is not necessary that the principal personally.

contemplates impersonal dealings where the principal need not personally encounters the third person with whom the agent interacts. The law in fact

know or meet the third person with whom the agent transacts: precisely, the purpose of agency is to extend the personality of the principal through the facility of the agent.4

by Hupan, or who are acting for and on its behalf and which Hupan is aware Thus, the abusive collection practices of third party collectors engaged

is a violation of SEC MC No. 18, series of 2019 and warrants the issuance of a cease and desist order (CDO). of shall be deemed the acts of Hupan. The ultimate responsibility for such collection practices falls on Hupan as the principai/lending company. The admitted abusive collection constitutes unfair debt collection practice which

Hupan/CASHWOW also stated during the hearing that they have

application to avoid privacy violations. Relative thereto, Hupan admitted in stopped the syncing of the phonebook of the borrowers with the online

its Position Paper that there are two formal complaints for privacy violation already filed against it with the National Privacy Commission.

Section 1 of SEC MC No. 18 series of 2019 (Prohibition on Unfair Debt

or co-makers shall also constitute unfair debt collection practice. in the borrower's contact list other than those who were named as guarantors Collection Practices of Financing Companies and Lending Companies) provides that notwithstanding the borrower's consent, contacting the persons

company under the principle of estoppel. application and the confirmed privacy violation complaints binds said previously been syncing the phonebook of the borrowers with the online The admission during the hearing that Hupan/CASHWOW has

Article 1431 of the. Civil Code provides that.

person relying thereon."s "Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the

his own acts and representations to the prejudice of the other party who relied declaration, act, or omission, intentionally and deliberately led another to upon them. In the law of evidence, whenever a party has, by his own rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. A party may not go back on Under the doctrine of estoppel, an admission or representation is

5 Philippine National Bank v. Intermediote Appellate Court, G.R. No. 66715, (September 18, 19901. 267 PHIL 720-730 4 Id. at 349, citing Orient Air Services & Hotel Representatives v. Court of Appeais, 274 Phil. 926 (1991)

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believe a particular thing true, to act upon such belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it."s

fair dealing, good faith and justice, and its purpose is to forbid one to speak The doctrine of estoppel is based upon the grounds of public policy.

whom they were directed and who reasonably relied thereon. The against his own act, representations, or commitments to the injury of one to

doctrine of estoppel springs from equitable principles and the equities in the

without its aid iniustice might result. It has been applied by this Court case. It is designed to aid the law in the administration of justice where

wherever and whenever special circumstances of a case so demand.?

Similarly, Rule 130, Section 26 of the Revised Rules on Evidence

may be given in evidence against him." For well-settled is the rule that provides that "The act, declaration or omission of a party as to a relevant fact

admissible against him, for the reason that it is fair to presume that they correspond with the truth, and it is his fault if they do not. If a man's "a man's acts, conduct and declaration, wherever made, if voluntary, are

not be accepted against him." 8 This is the 'reason why Rule 129, section 4 of reason why his admissions made in open court, under oath, should extrajudicial admissions are admissible against him, there seems to be no the Revised Rules on Evidence dispenses with the requirement of proof for admissions made by a party in the course of the proceedings in the same case.

constitutes as unfair debt collection practice which is a violation of SEC MC from claiming that it has not violated the privacy of its clients. Following the foregoing principles, Hupan/CASHWOW is estopped This

No. 18, series of 2019 and warrants the issuance of a cease and desist order (CDO)

The authority of the SEC and the manner by which it can issue CDOs are provided in Section 156 of the Revised Corporation Code (RCC), to wit:

welfare. The ex parte order shall be valid for a maximum period of twenty this Code, a rule, regulation, or order of the Commission, it may direct such practice which is fraudulent or can be reasonably expected to cause significant, imminent, and irreparable danger or injury to public safety or SEC. 156. Cease and Desist Orders. -- Whenever the Commission has person to desist from committing the act constituting thc violation. The reasonable basis to believe that a person has violated, or is about to violate, Commission may issuc a cease and desist order ex parte to enjoin an act o

fauitabie +f iaCorp.v.RCBCCapialCorn..G.R.No.187748.iD mber 18, 2008, 595 PHiL 537-589

PHIL 162-172 7 Philippine Nationol Bonk v. Court of Appeals, 183 Phil. 54, 63-64 (1979) IU.S.vs . Ching Po, 23 Phil. 578. 583 [1912] cited in Cuison v. Court of Appeals, G.R. No. 88539. [October 26, 19931. 298

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Investigation or criminal prosecution and/or initiate criminal prosecution for notice and hearing. Code, and/or transmit evidence to the Department of Justice for preliminary (20) days, without prejudice to the order being made permanent after due administratively against such person in accordance with Section 158 of this any violation of this Code, rule, or regulation. Thereafter, the Commission may proceed

delay in the restraint of acts that yield such results can only generate further injury to the public that the SEC is obliged to protect.? Commission finds it appropriate to issue a cease and desist order that aims to curtail fraud or irreparable danger or injury to public safety or welfare. Any Based on the foregoing, a prior hearing is not required whenever the

sanction for any violation of the RCC, rules and orders of the Commission, to 158 provides that a permanent CDO may be issued as an administrative Wi t Further, in relation to the CDO under Section 156 of the RCC, Section

case to exceed Two million pesos (P2,000.000.00): (b) Issuance of a forfeiture of its assets under the conditions in Title XIV of this Code. any of the Commission's orders has been violated, the Commission may extent of participation, nature, effects, frequency and seriousness of the violation: (a) Imposition of a fine ranging from Five thousand pesos (P5,000.00) to Two million pesos (P2,000,000.00), and not more than One ccrtificate of incorporation; and (d) Dissolution of the corporation and Commission finds that any provision of this Code, rules or regulations, or impose any or all of the following sanctions, taking into consideration the thousand pesos (P1,000.00) for each day of continuing violation but in no permanent cease and desist orderi (c) Suspension or revocation of the (Emphasis supplied) SEC. 158. Administrative Sanctions. -- If, after due notice and hearing, the

violation of SEC MC No. 18, series of 2019 is sufficient ground for the issuance of the Assailed CDO. Accordingiy, the unfair debt collection practice which constitutes as a

a Primanila Plans, Inc. vs. SEC, G.R, No. 193791, August 6, 2014

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Desist Orderfiled by Hupan is hereby DENIED for lack of merit. The CEASE AND DESIST ORDER issued against the operation of CASHWOW online application is hereby MADE PERMANENT. WHEREFORE, premises considered, The Motion to Lift Cease and

and published in a national newspaper of general circulation and furnished to all operating departments and offices of the Commission for their information and appropriate action. Let a copy of this Resolution be posted in the Commission's website:

collection practice relative to the operation of Hupan Lending Technology, Inc. and if necessary impose additional penalties, as applicable. Further, the CGFD is hereby DIRECTED to investigate the unfair debt

SO ORDERED Pasay City, Philippines; 05 November 2019.

EMLIC B. AQUINO

h V airperson

EPHYRO LUIS Commissioner ,AMATONG JAVEY PAUL D. FRANCISCO Commissioner

W LESTER K. LEE KARLO S. BELLO Commissioner Commissioner

* On official business