PESOKWENTO, KWENTO CASH, TBAG, CASH SKY, LOAN CASH, and EAST CASH

Securities and Exchange Commission COMMISSION EN BANC Republic of the Philippines Department of Finance IN THE MATTER OF: CASH SKY; LOAN CASH; and PESOKWENTO; PONDO CASH; TBAG; EAST CASH SEC CD0 Case No. 03-22-084 PROTECTION DEPARTMENT ENFORCEMENT AND INVESTOR (EIPD) Movant. CEASE AND DESIST ORDER to advertise their products and services. out, abetting and/or promoting lending/financing business and related the internet and social media platforms the promotional materials used immediately cease and desist from (a) operating, engaging in, carrying activities without the requisite license from the Commission, and (b) offering and/or advertising their lending business and related activities through the internet and any other media, and to delete or remove from as the ("Online Lending Operators", representatives and promoters, as well as the owners of the hosting sites of the Online Lending Operators, and any and all persons or entities involved, directly or indirectly, in their operations, and directing them to following online lending applications: PESOKWENTO, PONDO CASH, Order ("CDO") be issued against the operators and owners of the TBAG, CASH SKY, LOAN CASH, and EAST CASH (collectively referred to Department (EIPD) on 08 March 2022 praying that a Cease and Desist (the "Motion") filed by the Enforcement and Investor Protection This resolves the Motion for Issuance of a Cease and Desist Order including their agents, RELEVANT FACTS Ms. Julie Ann Coralde1 and others borrowers2 filed against the Online The filing of the instant Motion was triggered by the complaints of 1 Annex "A" of the Motion dated 08 March 2022. 2 Ibid, Annexes "D-1, "D-2, "D-3." St OGK CERTIFIED TRUE COPY OT THE DOCUMENTS ON RECORD PAGE PAGF BY PESOKWENTO; PONDO CASH; TBAG; CASH SKY; LOAN CASH; and EAST CASH SEC CDO Case No. 03-22-084 Cease and Desist Orde In the Matter of Page 2 of 9 were made in the form of threats to ruin their reputation, as well as physical harm their persons and their families. Department (the "CGFD") alleging that the Online Lending Operators are using unfair collection practices and carried out acts of harassment which Lending Operators with the Corporate Governance and Finance regulations administered and implemented by the Commission.3 EIPD for investigation and appropriate action, with the view of determining if there is a violation of the relevant laws, rules or Acting on the said complaints, the CGFD endorsed the matter to the show its online lending operations. internet presence and deleted its website, and relevant posts that will looked into the website of the Online Lending Operators and the social media platforms used by the latter in carrying out their online lending activities, and was able to confirm that the Online Lending Operators were indeed actually operating and maintaining an online lending investigation for possible violation of Republic Act No. 9474 or the Lending Company Regulation Act of 2007 which the Commission is mandated to administer and implement. For this purpose, the EIPD business.4 However, as regards Cash Sky, the EIPD was able to confirm that at the time of the filing of the Motion, the same has already ceased its On the basis thereof, the EIPD proceeded to conduct a formal investigators who executed and issued a joint affidavit which was submitted in evidence.5 The foregoing was confirmed and attested to by the EIPD made under the guise of service fees, and the onerous and unreasonable fact that the same already violated the right to privacy of the borrowers. exorbitant charges and/or deductions from the loan amount which were Operators. The evidence showed that the foregoing acts/practices were apparently resorted to by the Online Lending Operators to ensure The evidence submitted by the EIPD also showed that the Online Lending terms and conditions that were imposed by the Online Lending efficient and effective collection of the loan amounts notwithstanding the Online Lending Operators, and who alleged and narrated their Operators are engaged in unfair collection practices, the EIPD submitted evidence showing the comments, reviews and complaints of a considerable number of individuals who availed of the services of the experiences of being harassed, the alleged unlawful imposition of Moreover, in support of its allegation that the Online Lending 5 Annex "B" of the Motion 4 See Annexes "C" to "C-4" of the Motion 3 Par. 3 of the Motion THE DOCUMENT'S ON RECORD "ERTIFIED TRUE COPY O Mt O( PAGE -V Ae PESOKWENTO; PONDO CASH; TBAG; CASH SKY; LOAN CASH; and EAST CASH SEC CD0 Case No. 03-22-084 Cease and Desist Ordel In the Matter of Page 3 of 9 Operators misrepresented to the public that they were not collecting charges and fees.6 in evidence by the EIPD. 8 The CGFD likewise added that the Online Lending Operators are not included in the List of Financing and Lending Companies with Online Lending Platforms (OLPs) reported to the 2019.9 Commission pursuant to SEC Memorandum Circular No. 19 series of corporations,7 and they do not have the Certificate of Authority, both of Regulation Act of 2007 of all entities that are engaged in lending CRMD through the Certifications that they issued, which were submitted which are required by Republic Act No. 9474 or the Lending Company business/activities. This finding was confirmed by the CGFD and the Online Lending Operators are not registered with the Commission as Finally, the investigation conducted by the EIPD revealed that the ISSUE issuance of a CDO against the Online Lending Operators. Whether the evidence on record presented by the EIPD warrants the RULING The Motion is impressed with merit. without a validly subsisting Certificate of Authority issued by the the allegations in the Motion that the Online Lending Operators are actually engaged in the business of offering and providing loans to the Commission. public, and are carrying out transactions proper to a lending company The pieces of evidence presented by the EIPD sufficiently support Commission are specifically provided in Section 5.1(a) of Republic Act No. 8799 or the Securities Regulation Code (SRC), thus: The powers and authority, as well as the jurisdiction of the and functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall act with transparency and shall have the powers "SECTION 5. Powers and Functions of the Commission. - 5.1. The Disclosure Requirements on Advertisements of Financing Compar ies and Lending Companies. and Annex "E" of the Motion dated 08 March 2022. Ibid, Annex "F." Annexes C-1 to C-4 of the Motion Reporting of Online Lending Platform. CERTIFIED TRUE COPY OP THE DOCUMENTS ON RECORD FAGE PACF S PESOKWENTO; PONDO CASH; TBAG; CASH SKY; LOAN CASH; and EAST CASH SEC CDO Case No. 03-22-084 Cease and Desist Order In the Matter of. Page 4 of 9 Commission shall have, among others, the following powers and functions: (a Have jurisdiction and supervision over all corporations franchises and/or a license or permit issued by the Government; partnerships or associations who are the grantees of primary XXX Regulate, investigate or supervise the activities of persons to ensure compliance;: XXX (n laws." (Emphasis supplied) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these that the Commission has the concomitant duty to impose the appropriate sanctions/penalties for non-compliance, thus: persons, and exact compliance with laws administered by it, the Supreme Court emphasized in Provident International Resources Corp. v. Venus,io In relation to the performance of its authority to investigate Warranted." (Emphasis supplied) cooperatives, homeowners' association, and labor unions); compel legal and regulatory compliances; conduct inspections; and impose fines or other penalties for violations of the Revised Securities Act, as well as implementing rules and directives of the SEC, such as may be suspend or revoke (after due notice and hearing), certificates of registration of corporations, partnerships and associations (excluding of a corporation's concerns. This authority more vividly springs from the fact that a corporation owes its existence to the concession of its corporate franchise from the state. responsibilities, the SEC may pass upon applications for, or may "It can be said that the SEC's regulatory authority over private corporations encompasses a wide margin of areas, touching nearly all Under itsregulatory operating as lending companies should be registered as a corporation implement is Republic Act No. 9474, otherwise known as the "Lending Company Regulation Act of 2007" (the "Lending Company Regulation and should have a Certificate of Authority issued by the Commission, to Wit: Act"), Section 4 of which specifically requires that persons or entities Among the existing laws that the Commission is mandated to 10 G.R. No. 167041, 17 June 2008. CERTIFIED TRUE COPY OI SEG OG PAG CHET UMENTS ON RECORE O PESOKWENTO; PONDO CASH; TBAG; CASH SKY; LOAN CASH; and EAST CASH SEC CDO Case No. 03-22-084 Cease and Desist Order In the Matter o Page 5 of 9 one year after the date of effectivity of this Act. disallowed from engaging in the business of granting loan to the public established only as a corporation: Provided, That existing lending investors organized as single proprietorships or partnerships shall be "SEc. 4. Form of Organization. - A lending company shall be supplied) No lending company shall conduct business unless granted an authority to operate by the SEc." (Emphasis and underscoring without being registered as a corporation and without a subsisting Certificate of Authority obtained from the Commission, engages in the business of a lending company, to wit: The Lending Company Regulation Act penalizes any person who, years or both, at the discretion of the court, shall be imposed upon: imprisonment of not less than six months but not more than ten (10) "SEC. 12. Penalty. - A fine of not less than Ten thousand pesos (P10,000.00) and not more than fifty thousand pesos (P50,00.00) or 1 Any person who shall engage in the business of a lending company without a validly subsisting authority to operate from the SEC. N d The president, treasurer and other officers of the corporation, including the managing officer thereof, who shall knowingly and willingly: Engage in the business of a lending company without a b. Hold themselves out to be a lending company, either yalidly subsisting authority to operate from the SEC; C. through other representations without authority; Make use of a trade or firm name containing the words through advertisement in whatever form, whether in its stationery, commercial! paper, or other document, or d Violate the provisions of this Act." (Emphasis supplied) defined in this Act without authority; and designation that would give the public the impression that it is engaged in the business of a lending company as lending company or "lending investor" or any other commission of practices prejudicial to public interest, thus: Section 2 of the Lending Company Regulation Act to implement the policy of regulating lending companies to effectively prevent and mitigate the Moreover, it bears emphasis that the Commission is mandated in public interest; and to lay down the minimum requirements andoty ot their operation on a sound, efficient and stable condition to derive the optimum advantages from them as an additional -source of credit. to prevent and mitigate, as far as practicable practices prejudicial to State to regulate the establishment of lending Companies and to place "SEC 2. Declaration of Policy. - It is hereby declared the policy of the THE DOCUMENTS ON RECORE A HA PESOKWENTO; PONDO CASH; TBAG; CASH SKY; LOAN CASH; and EAST CASH SEC CD0 Case No. 03-22-084 Cease and Desist Order In the Matter of. Page 6 of 9 (Emphasis supplied) standards under which they may be established and do business. policy, the State seeks to prevent and penalize. perpetrated and imposed by the Online Lending Operators, their agents are not registered corporations. Moreover, the abusive collection and representatives are the very acts and practices that, as a matter of continued operation of the Online Lending Operators constitutes a clear they are engaged in, or are carrying out a lending business without the required license from the Commission, not to mention the fact that they practices, misrepresentations, and unreasonable terms and conditions violation of, and should be penalized pursuant to the Lending Company Regulation Act because the evidence presented by the EIPD shows that On the basis of the foregoing, the Commission finds that the carry out its regulatory functions for the purpose, among others, of protecting the public, Section 179(f) and (p) of the Revised Corporation other powers which are incidental or necessary in carrying out its mandate, to wit: Code authorizes it to issue a cease and desist order and to perform such To ensure that the Commission is able to effectively perform and The Commission shall have the power and authority to: "Section 179. Powers, Functions, and Jurisdiction of the Commission. XXX XXXXXX f} Issue cease and desist orders ex parte to prevent imminent fraud or injury to the public; xXX XXX XXX (p) Exercise such other powers provided by law or those, which may be necessary or incidental to carrying out the powers expressly granted to the Commission." (Emphasis added) appropriate penalties provided under Section 12 of the same statute. in engaging in the Lending Company Regulation Act, which warrants the imposition of the registrations/licenses constitutes a clear violation of Section 4 of the Certificate of Authority which is required to validly engage in the lending business and related activities. The act of the Online Lending Operators Neither is there anything in the records of the Commission that will show that these Online Lending Operators Applications have been issued the evidence, confirmed that the Online Lending Operators are not registered with the Commission either as corporations, partnerships, or OPC. The Certification issued by the CRMD, which the EIPD submitted in lendingbusiness sans.the required S+ CERTIF{ED TRUE COPY O} THE DOCUMENTS ON RECORD G PAGE PESOKWENTO; PONDO CASH; TBAG; CASH SKY; LOAN CASH; and EAST CASH SEC CDO Case No. 03-22-084 Cease and Desist Order In the Matter of Page 7 of 9 fraud11 which was intentionally employed to lead the public into the belief that they are engaged in a legitimate lending business when in truth and in fact, it is not and has never been the case. through their respective online lending applications constitutes actual activities carried out by the Online Lending Operators are illegal on the Online Lending Operators in offering and providing loans to the public ground that they are not registered as corporations, and have no Certificate of Authority issued by the Commission. Also, the act of these Thus, the Commission finds that the lending business and related Financing Companies and Lending Companies). As provided in the said Circular, the following conduct constitute unfair collection practices: which are expressly prohibited under SEC Memorandum Circular No. 18, Series of 2019 (Prohibition on Unfair Debt Collection Practices of was substantiated by evidence constitute unfair debt collection practices collection practices employed by the Online Lending Operators which Finally, the Commission finds and so holds that the abusive O harm the physical person, reputation or property of any person; The use or threat of use of violence or other criminal means to b. The use of threats to take any action that cannot legally be taken; C. The use of obscenities, insults, or profane language the natural amount to a criminal act or offense under applicable laws; consequence of which is to abuse the borrower and/or which d the confidentiality of information); Disclosure or publication of the names and other personal information of borrowers who allegedly refuse to pay debts except as may be allowed under Section 2 hereof (exceptions to (exceptions to the confidentiality of information); loan information, which is known, or which should be known, to be false, including the failure to communicate that the debt is being disputed, except as may be allowed under Section 2 hereof Communicating or threatening to communicate to any person 4 The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a borrower; and g which shall be defined as contact before 6:00 AM or after 10:00 Making contact at unreasonable/inconvenient times or hours. (Encinares vs Achero, G.R. No. 161419, August 25, 2009). deception practiced by means of the misrepresentation or concealment of a material fact. Constructive fraud even though the act is not done with an actual design to commit positiveffraud"or injury upon other persons. is construed as a fraud because of its detrimental effect upon public interests and public or private confidenc 1 "Fraud is of two kinds: actual or constructive. Actual or positive fraud proceeds from an intentional PAG PHE DOCuMENtS ON RECORb CERTIFIED TRUE COPY O E PAK F PESOKWENTO; PONDO CASH; TBAG; CASH SKY; LOAN CASH; and EAST CASH SEC CDO Case No. 03-22-084 Cease and Desist Orde n the Matter Page 8 of 9 times are the only reasonable or convenient opportunities for PM, unless the account is past due for more than fifteen (15) days, or the borrower has given express consent that the said contact. relation to the SRC and the Lending Company Regulation Act. are operating a legitimate business. This is a power that is expressly granted to the Commission under Section 179 (f) and (p) of the RCC, in only to stop an illegal act, but also to prevent the continued fraud on the public who are led by the Online Lending Operators to the belief that they the EIPD that the issuance of a CDO is warranted in the instant case not On account thereof, the Commission hereby affirms the position of unauthorized or illegal lending activities. times upheld, and that the public is protected from persons who carry out libelous language in collecting the loaned amount, have no place in a society that is governed by, and faithfully adheres to positive laws. The Lending Company Regulation Act, ensure that public interest is at all and subjecting its debtors to unfair treatment through abusive and even Commission is duty-bound to strictly implement the provisions of the offering and providing loans to the public, charging high interest rates, The acts of the unregistered Online Lending Operators in illegally Lending Companies or Financing Companies. have incorporated and have secured from this Commission the requisite ORDERED to immediately CEASE AND DESIST from engaging in, carrying out, promoting and facilitating any lending activity/transaction until they Certificate of Incorporation and Certificate of Authority to Operate as 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 WHEREFORE, premises considered, PESOKWENTO, PONDO CASH, lending business through the internet or any other media, and to delete/remove any and all materials involving or covering the same. and all persons acting for and on their behalf, are also directed to immediately CEASE and DESIST from offering and advertising their CASH, its owners, operators, promoters, representatives, agents and any PESOKWENTO, PONDO CASH, TBAG, CASH SKY, LOAN CASH, and EAST The EIPD is hereby DIRECTED to: 1.) Cause the posting of a copy of this CDO in the Commission's website, and the publication of the same in two (2) newspapers of general circulation; +.( OG CERTIFIED TRUE COPY OP THE D -uments ON RECORD DA( A PESOKWENTO; PONDO CASH; TBAG; CASH SKY; LOAN CASH; and EAST CASH SEC CDO Case No. 03-22-084 Cease and Desist Order In the Matter of. Page 9 of 9 2.) Coordinate with the appropriate cyber-criminal investigation also directed to conduct an investigation to determine and including its author, creator, owner and its officers, or any recommend the filing of a criminal complaint, if warranted; and and enforcement agency(ies) of the government in order to involved in the illegal online operations of PESOKWENTO, person, agent, representative conniving with them. The EIPD is determine, identify, and apprehend the responsible persons PONDO CASH, TBAG, CASH SKY, LOAN CASH, and EAST CASH, 3.) Submit a formal compliance report, by way.of pleading, to the Commission En Banc within.ten.(10) days from receipt of this CDO. to lift thereof within five (5) days 'from the "date.of its posting or publication. parties subject of the Cease and Desist Order may file a Verified Motion 4-3, Rule IV, Part II of the 2016 Rules of Procedure of the Commission, the In accordance with the provisions of Sec. 64.312 of the SRC and Sec. SO ORDERED. 195 Pasay City, 22 March 2022 EMILIO B. AQUINO Chair erson IAVEY /PAUL D. FRANCISCO Commissioner KELVIN LESTER K. LEE Commissioner KARLO S. BELLO Commissioner MCJILL BRYANT T. FERNANDEZ Commissioner later than fifteen (15) days from its filing and the resolution thereof shall be made notlater"than ten (10) days from the termination of the hearing. If the Commission fails to resolye the request within the(time herein prescribed, the cease and desist order shall automatically be lifted. 12 Any person against whom a cease and desist order was issued may, within five (5) days from receipt of the order, file a formal request for a lifting thereof. Said request shall be set for hearing by the Commission not. CERTIFIFD TRUE COPY OF PAGE THE DO C CUMENTS ON RECORD 0 PAGES B Y