SEC CDO CASE NO. 03-22-084In the matter of: PESOKWENTO Petitioner-Movant, versus- ENFORCEMENT AND INVESTOR PROTECTION DEPARTMENT, Respondent.

Securities and Exchange Commission COMMISSION EN BANC Republic of the Philippines Department of Finance

IN THE MATTER OF: PESOKWENTO.

SEC CDO CASE NO. 03-22-084 Promulgated: 19 July 2022

ENFORCEMENT AND INVESTOR PROTECTION (EIPD), X DEPARTMENT Movan't.

RESOLUTION

by PESOKWENTO, through counsel, praying that the Commission lifts the Cease and Desist Order dated 22 March 2022 (the "Assailed CD0"), the Cease and Desist Order Dated 22 March 2022 (the "Motion to Lift") filed] dispositive portion of which reads: For consideration of this Commission is the Verified Motion to Lift

AND DESIST from engaging in, carrying out, promoting and facilitating any lending activity /transaction until they have incorporated and have secured from this Commission the requisite Certificate of Incorporation and Certificate of Authority to Operate as Lending Companies or Financing Companies. "WHEREFORE, premises considered, PESOKWENTO, PONDO CASH, TBAG, CASH SKY, LOAN CASH,and EAST CASH,its owners, operators, promoters, representatives, agents AND ANY AND ALL PERSONS CLAIMING AND ACTING FOR AND IN THEIR BEHALF, are hereby ORDERED to immediately CEASE

through the internet or any other media, and to delete DESIST from offering and advertising their lending business PESOKWENTO, PONDO CASH, TBAG, CASH SKY, LOAN CASH, and EAST CASH, its owners, representatives, agents and any and all persons acting for and, on their behalf, are also directed to immediately CEASE and operators, promoters

1 Dated 4 April 2022 which was received by the Commission on 7 April 2022

EC .aceN0. RESOLUTION Page 2 of 8 WYENI 2-0

/remove any and all materials involving or covering the same."

RELEVANT FACTS

through the Office of the General Counsel, a Motion for Issuance of a Cease operators/applications, which were found to be in violation of Republic Act. No. 9474 (the "Lending Company Regulation Act of 2007"), and the relevant regulations issued by the Commission. PESOKWENTO was included in the Motion and On 8 March 2022, the EIPD filed before the Commission En Banc, Desist Order (the"Motion") as one of the online lending against online lending

regulations. operators/applications that was found to have violated the relevant

lending and/or financing business without being a corporation, and/or operating as such without the required Certificate of Authority, and/or operators/applications, including PESOKWENTO were either engaged in have violated the relevant regulations issued by the Commission. In relation to Movant PESOKWENTO, the Commission specifically found that it violated Memorandum Circular Nos. 18 and 19, series of 2019. CDO after finding, based on substantial evidence, that the online lending On 22 March 2022, the Commission En Banc issued the Assailed

violated the Lending Company where it categorically and vehemently denied the allegation that it On 07 April 2022, PESOKWENTO filed the instant Motion to lift Reg gulation Act of 2007, arguing that

and operates the online lending SUPER-SPACE PH LENDING INC. ace" for brevity) which owns ow as PESOKWENTO (a business name of Super-Sp: Commission, having been iSS n duly registered with the f Incorporation and

business name.4 Thus, movant argued that it may lawfully engage in any lending activity, and the enforcement of the CDO against it was not Affidavit of Compliance3 dated 06 s PESOKWENTO is an online lending platform owned by it, and is merely a Certificate Authority to Oper Companies.2 PESOKWENTO also warranted. nber 2022 where it declared that that Super-Space submitted an Companies or Financing

registered corporation with a Certificated of Authority to Operate as a denies the Motion to Lift on the ground that while Super-Space is a duly In its Comment/Opposition, the EIPD prayed that the Commission

2 Par. 11 of the Motion to Lift (see Annex "B") 3 Par. 8 of the Motion to Lift (see Annex "A) 4 Par. 8 of the Motion to Lift

SEC CD0 Case No. 03-22-084 PESOKWENTO RESOLUTION Page 3 of 8 Lending Company, it nonetheless operated PESOKWENTO in violation of SEC Memorandum Circular No. 19, Series of 20195 (SEC MC No. 19).

ISSUE

to Lift warrant the issuance of an order lifting the Assailed CDO. Whether the arguments and the evidence presented in the Motion

RULING

The Commission resolves to deny the Motion for want of merit.

relating to the operation of lending or financing business. which PESOKWENTO seeks to be lifted in so far as it is concerned, the Commission used as basis not only the Lending Company Regulation Act of 2007, but also the relevant circulars/regulations that were issued At the outset, it should be pointed out that in the Assailed CDO

lending and financing business all embody provisions where the State lending companies in the development of the national economy, because starting a business, or in growing and developing an existing one. It is in are sound, competitive, stable, and efficient. Moreover, it should be emphasized that these legislations curtail or prevent acts or practices that are prejudicial to the public expressly recognizes the essential and critical role of financing and they provide medium and long term credits for investments needed in operations, to ensure that just like other financial institutions, the same interest. this context that the State deemed In our jurisdiction, the existing legislationst which regulate the were intended, among others, to ecessary to regulate their

disclose in their advertisements and online lending platforms the Lending Company Regulation Act of 2007, the Commission issued, among others, Memorandum Circular No. 18 s. 2019 (MC 18) which prohibits unfair debt collection practices, and Memorandum Circular No. 19 s. 2019 (MC 19) which required lending and financing companies to fully As the agency mandated to implement the provisions of the

Companies and Lending Companies and Reporting of Online Lending Platforms). SEC Memorandum Circular No. 19, Series of 2019 (Disclosure Requirements on Advertisements of Financing

6 Republic Act. No. 9474, Republic Act No. 5980 (the "Financing Company Act of 1998), Republic Act. No. 3765 (the "Truth in Lending Act") SEC. 1. Required Disclosures. - FCs and LCs shall fully disclose in their Advertisements and Online Lending A." Corporate Name, "SEC Registration Number and Certificate of Authority to Operate a B. An advisory for their prospective borrowers to study the terms and conditions in the Disclosure Platforms the following: Financing/ Online Lending Platforms; and Statement before g Company (CA) Number in a conspicuous portion of their Advertisements and ceeding with the loan t

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lending platforms that were recorded as of 2 November 2021. These circulars, having been issued by the Commission in the exercise of a delegated rule-making power, has the force and effect of law.7 lending platforms. The Commission also issued Memorandum Circular No. 10, s. 2021 (MC 10) which imposed a moratorium on the registration of new online lending platforms including existing lending companies that will engage in the same, and only allowed the operation of online information prescribed therein, and to report all their existing online

which owns and operates the online lending platform known as of authority to operate as a lending company is merely a privilege granted only to know the laws and regulations applicable to it, but also to fully and faithfully comply with the same. PESOKWENTO, the grant of a certificate of incorporation and certificate by the State to those who show, to the satisfaction of the Commission, that they are deserving of the same. It thus behooves Super-Space not Relative thereto, and lest it should be forgotten by Super-Space

revoked or rescinded on the basis of a finding of violation of such laws, rules and regulations, among others. The reason for the foregoing was that licenses are not contracts or property right protected by the due process clause of the Constitution, to wit: Company (CA) which the Commission granted to Super-Space is in the nature of a license which equally requires its continued compliance with all applicable laws, rules and regulations; and that the same may be explained in Oposa vs Factoran9, where the Supreme Court emphasize Moreover, the Certificate of Authority to Operate as a Lending

regulation should be germane to the objects and purposes of the law and that it should conform to 7 "Administrative agencies are clothed with rule-making powers because the lawmaking body finds it impracticable, if not impossible, to anticipate and provide for the multifarious and complex situations that may be encountered in enforcing the law. All that is required is that the the standards that the law prescribes.

The lawmaking body cannot possibly provide for all the details in the enforcement of a particular Statute.

by the statutes are complied with: therefor, any material statement in the Articles of Incorporation (Care Best International, Inc. vs Securities and Exchange Commission G.R, No. 101083 July 30, 1993 : -Incorporation is a grant of privilege from the State, and the State is entitled to preserve the value grant thereof must be strictly complied with. To this end, the State prescribes and gives notice, through statutes and regulations of the necessary requirements and procedures for the grant of the privilege. In this jurisdiction, the Corporation Code prescribes the requirements for the grant of a corporate franchise, and the certificate ofregistration may be acquired only if the conditions required Which is a falsehood may be considered fraudulent, regardless of the intent of the incorporators. The grant of the rule-making power to administrative agencies is a relaxation of the principle of separation of powers and is an exception to the nondelegation of legislative powers. Administrative regulations or growing complexity of modern life, the multiplication of the subjects of governmental regulations, and the increased difficulty of administering the law." (People vs Maceren, G.R. No. L-32166, October 18, "subordinate legislation" calculated to promote the public interest are necessary because of "the of such privilege. Thus in order to enjoy such privilege, the requirements and procedure for the 1977

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Constitution. In Tan vs. Director of Forestry, this Court held: "Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract, property or a property right protected by the due process clause of the

to the end that public welfare is promoted. A timber license is not a contract within the purview of the due process clause; it is only a license or privilege, which can be validly withdrawn whenever dictated by public interest or public Welfare as in this case. regulates the utilization and disposition of forest resources : A timber license is an instrument by which the State

property or property rights (People vs. Ong Tin, 54 O.G. of license does not create irrevocable rights, neither is it 7576)." A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract between the authority, federal, state, or municipal, granting it and the person to whom it is granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation (37 C.J. 168). Thus, this Court held that the granting

regulations administered by it, to ensure that regulated entities fully among the important contexts which the Commission considers in comply with all statutory and/or regulatory requirements. performing its mandate to fully implement the provisions of the Lending Company Regulation Act of 2007, and the other laws, rules and The foregoing legal precepts and doctrinal pronouncements are

lifting of the CDO as it made the company compliant with applicable corporation with a subsisting CA. PESOKWENTO also argues that Super- not apply to it because it has shown that Super-Space, which actually owns and operates the online lending platform, is a registered Space's submission of the Affidavit of Compliance further justifies the regulations. In the instant case, PESOKWENTO maintains that the CDO should

against PESOKWENTO however justified the issuance of the Assailed CDO and denial of the Motion to Lift. The evidence on record which consists of the complaints filed

the fact that these are licenses issued by the State requires Super-Space CA are essential in validly conducting and operating a lending business, While it is true that Super-Space's Certificate of Incorporation and

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shown to have violated any applicable law, rule or regulation. to fully comply with all the applicable rules and regulations issued by the business, operated online or otherwise, should be sustained corporation, in this case Super-Space, or any person for that matter, is words, the issuance of a CDO restraining the further conduct of a lending notwithstanding a subsisting Certificate of Incorporation and CA, if a Commission to justify its continued enjoyment of this privilege. In other

issuing the Assailed CDO. upon its borrowers. The evidence presented by the EIPD show that offensive/foul language to exact payment of the loan amount. No contrary Commission that PESOKWENTO violated MC 18 which was the basis in complaints filed against PESOKWENTO shows that PESOKWENTO has expressly prohibited and penalized under MC 18, made PESOKWENTO harassed and threatened borrowers, and used evidence was presented by PESOKWENTO in the Motion to Lift. There is thus no cogent reason to reconsider the finding and conclusion of this employed unfair and abusive debt collection practices which are misrepresentations, and imposed unreasonable terms and conditions In the instant case, the evidence on record which consists of the

prejudicial to the public interest.11 harassment.1o The issuance and implementation of MC No. 18 was made mandate, among others, of placing their operations on a sound, competitive, stable and efficient basis, and in preventing acts or practices address the abusive, unethical and unfair collection practices of lending and/or financing companies, specifically those who purposely engage the services of third party service providers to avoid liability for client pursuant to a valid exercise of the regulatory and supervisory power of the Commission over lending and financing companies, to carry out its It should be emphasized that MC No. 18 was issued to effectively

of lending and financing companies in providing medium and long-term credit for investments, and as an additional source of credit.13 MC No. 18 jurisprudence12 that a loan obligation should be fully satisfied or paid, companies from enforcing a contractual obligation against its borrowers for debts lawfully made. After all, it is established both in law and especially in the context of the State's full recognition of the critical role MC No. 18 was not issued to prevent lending or financing

11 See Section 2 of Republic Act No. 8556, otherwise known as the "Financing Company Act of 1998" and defendant to prove payment, rather than on the plaintiff to prove non-payment. Indeed, once the existence of an indebtedness is duly established by evidence, the burden of showing with legal certainty that the obligation has been discharged by payment rests on the debtor." (Bognot vs RRI Lending Corporation. G.R. No. 180144, September 24, 2014) 10 See First and Second WHEREAS Clauses of the MC No. 18 Section 2 of Republic Act No. 9474, otherwise known as the "Lending Company Regulation Act of 2007 12 -Jurisprudence tells us that one who pleads payment has the burden of proving it; the burden rests on the 13 bid

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law, and to protect or safeguard the privacy, dignity and wellbeing of public interest, among others. lending and/or financing companies is made within the bounds of what PESOKWENTO did in the instant case, merits the imposition of appropriate sanctions, including the issuance of CDO, for the protection was essentially issued to ensure that the collection of loans by of borrowers. Thus, the violation of the provisions of Mc 18, which is

corporate information and to post an advisory in its OLP informing prospective borrowers of the terms and conditions of the Disclosure Statement. This effectively misled the public into thinking that PESOKWENTO is an independent entity operating a lending business. the EIPD, that Super-Space violated MC 19 when it failed to disclose its Finally, the evidence on record also shows, as correctly pointed by

cogent reason to lift the CDO insofar as PESOKWENTO is concerned. On the basis of the foregoing, the Commission does not find any

March 2022 issued against PESOKWENTO is hereby made PERMANENT. Cease and Desist Order Dated 22 March 2022 filed by PES0KWENTO is hereby DENIED for lack of merit. The Cease and Desist Order dated 22 WHEREFORE, premises considered, the Verified Motion to Lift

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

online application and if necessary, impose the appropriate penalties, as debt collection practice relative to the operation of PESOKWENTO's applicable. Further, the CGFD is hereby DIRECTED to investigate the unfair

SO ORDERED.

Makati City, Philippines; 19 July 2022.

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EMILIOIBS IAQUINO

Chairperson

JAVEY PAUL D. FRANCISCO KELVIN LESTER K. LEE

Commissioner Commissioner

KARLO'S#BELLO Commissioner *t- MGIILL BRYANT T FERNANDEZ Commissioner