INSTANT PERA; QUICK PESO

Securities c Republic of the Philippines 'Department of Finance and Exchange Commission COMMISSION EN BANC QUICKPESO. In the matter of: INSTANT PERA; SEC CDO Case No. 09-19-054 DEPARTMENT, INVESTOR PROTECTION ENFORCEMENT AND Movant. K RESOLUTION the Securities and Exchange Commission against its online lending application Quick Peso be lifted and that an Order be issued clarifying that its Quick Peso is not included among the online lending operators who are covered by the said Order. Lift Cease and Desist Orderl filed by Respondent-Movant 9F Lending Philippines Incorporated praying that the Cease and Desist Order2 issued by For consideration of the Commission En Banc is a Verified Motion to THE PARTIES sanctions including suspension or revocation of the lending company's issuance of the CDO or injunction are present. Likewise, under Section 9(f) Regulation Act of 2007, the SEC is authorized to impose such administrative the General Counsel ("OGC"), by any operating department, either motu propio or upon a verified complaint by the public, after conducting a proper investigation or verification, if there is a finding that the grounds for the of Republic Act No. 9474, otherwise known as the Lending Company Rules of Procedure of the Securities and Exchange Commission ("SEC"), an action for the issuance of a CDO or injunction may be commenced upon the the Department tasked to investigate, motu propio or upon complaint or referral, violations of the law and the rules and regulations of the Commission and to, among others, initiate the issuance of a Cease and Desist Order ("CDO") by the Commission. Pursuant to Section 4-1, Rule IV of the 2016 filing of an application with the Commission En Banc, through the Office of Movant Enforcement and Investor Protection Department ("EIPD") is 2 Dated 12 September 2019 1 Dated 20 September 2019 For: Motion to Lift Cease In the matter of: Quickpeso, Movar Page 2 of 11 SEC En B case N. 09-19-0s and Desist Orde is fraudulent or can reasonably be expected to cause significant, imminent, and irreparable danger or injury to public safety or welfare. imminent fraud or injury to the public and to enjoin an act or practice which of the Revised Corporation Code of the Philippines (RCC) grants the Commission among others, the power to issue CDOs ex parte to prevent authority to operate and the imposition of fines for violations of the Act and regulations issued by the SEC in pursuance thereto. Moreover, Section 179(f) as a lending company on the basis of the Certificate of Authority No. 2916 issued on 15 March 2019 in its favor.3 Registration No. CS201904471 and authorized by the Commission to operate registered under the laws of the Republic of the Philippines with SEC Respondent-Movant 9F, on the other hand, is a corporation duly ANTECEDENT FACTS to waiver of charges and fees, and violate the right to privacy of their debtors Memorandum are several complaints received by the CGFD against Online Lending Operators impose high interest rates, unilaterally implement onerous and unreasonable terms and conditions, make misrepresentations as Lending Applications which have not been issued Certificates of Authority to entities/online applications/platforms. Most of these complaints alleged that and complainants.5 2019 (Memorandum) from the Corporate Governance and Finance Department ("CGFD") endorsing for its appropriate action a list of Online Operate as Lending Companies or Financing Companies.4 Included in the On 13 August 2019, EIPD received a Memorandum dated 07 August and/or Google Applications of the subject Online Lending Operators: where it was able to confirm the existence of the websites, Facebook Accounts Acting on the said Memorandum, EIPD conducted its investigation and information gathered by the EIPD also disclosed that before a person can apply for a loan from the Online Lending Operators, the online lending Google Applications, however, do not state the name of the corporations or entities who owns and/or operates them. Moreover, the pieces of evidence Operators are being advertised and promoted to entice people to avail of the loans they are offering. Most of these websites, Facebook Accounts and/or The lending businesses and related activities of the Online Lending 4 Annex "A" of the Motion for Issuance of Cease and Desist Order dated 1 1 September 2019 5 Annex "C" of the Motion for Issuance of Cease and Desist Order dated 11 September 2019 3 Annex "D" of 9F's Verified Motion to Lift Cease and Desist Order Ad Cautelam dated 20 September Annex "B" of the Motion for Issuance of Cease and Desist Order dated 11 September 2019 201 For: Motion to Lift Cease SEC En Banc Case No. 09-19-054 Page 3 of 11 In the matter of: Quickpeso, Movan. isf{r contained in the latter's mobile phones informing the same that the person be filed before the proper barangay and/or the matter will be posted in the social media if payments of the amount due is not made. and full payments from its debtors by sending a text blast to the persons concerned obtained a loan from them but refuses to pay the amount due. information is being utilized by the online lending operators to exact prompt Likewise, the Online Lending Operators threatens its debtors that cases will phone. By downloading and installing the online lending application, the online lending operator gains access to the applicant's personal information contained in the mobile phone which also includes the contact list, Facebook accounts, and email addresses of all individuals stored therein. This personal applications must be downloaded and installed in the applicant's mobile adversely affected their health and well-being. to have suffered depression, sleepless nights, embarrassment, humiliation, and Due to these abusive collection practices, debtors/complainants alleged lending/financing business. sites from operating, engaging in, carrying out and/or promoting its lending applications, their agents, representatives, promoters, and hosting September 2019, enjoining the operators and owners of the subject online In view of the foregoing, a CDO was issued by the Commission on 12 admitted that it is currently doing business under the name "Quick Peso" and prayed that the issued CDO against it be lifted since it is not the entity upon which the subject CDO is directed against. Cautelam dated 20 September 2019, through its counsel. In its motion, 9F 9F thereafter filed its Verified Motion to Lift Cease and Desist Order Ad who have applied for license however, 9F has no knowledge or information, application is a Peso Symbol;8 and (3) It has registered the use of "Quick Peso" word mark and its logo with the Intellectual Property Office.? on the status of the said entities;' (2) 9F's Quick Peso online lending operator 9F alleged that (1) there are currently several online lending operators been issued a Certificate of Authority to Operate as Lending Company, as is being conducted and carried out by a duly incorporated entity which has 9F also maintains that "Quick Peso" transactions are not illegal since it Annex "C" and "C-1" of 9Fs Verified Motion to Lift Cease and Desist Order Ad Cautelam dated 20 : Annex "B" of 9F's Verified Motion to Lift Cease and Desist Order Ad Cautelam dated 20 September Annexes "A" and "A-1" of 9F's Verified Motion to Lift Cease and Desist Order Ad Cautelam dated 20 2019 September 2019 September 2019 For: Motion to Lift Cease and Desist Orde. SEC En Banc Case No. 09-19-05 Page 4 of 1 In the matter of: Quickpeso, Movan. evidenced by its Company Registration No. CS201904471 and Certificate of Authority No. 2916.10 the hearing on the Motion to Lift CDO dated 20 September 2019 filed by it. directing 9F to Appear before the Office of the General Counsel ("OGC") for On 24 September 2019, an Order was issued by the Commission necessary documents to substantiate their respective claims. hearing and to furnish EIPD with a copy of the same. Likewise, EIPD was period from receipt thereof. Both parties were directed to attach all the Both parties appeared through their respective counsels. On 07 October 2019, an Order was issued in relation to the 03 October 2019 hearing directing 9F to file its position paper within a period of ten (10) days from the date of directed to file its comment/opposition to 9F's position paper within the same On 03 October 2019, a clarificatory hearing was conducted by the OGC. advertisement or online lending platforms" it reiterated its allegations in its Motion to Lift dated 20 September 2019. 9F companies to disclose in their online lending platforms the "corporate name, SEC Registration Number, and Certificate of Authority to Operate a Financing/Lending Company Number in a conspicuous portion of their also admitted that it initially failed to comply with the directive of the Commission in SEC Memorandum Circular No. 19, which required lending On 10 October 2019, 9F filed its position paper of the same date where provisions set forth in SEC Memorandum Circular No. 19, and pay the indicates 9F's corporate name in its website to inform its prospective borrowers that it is a duly registered and authorized entity. 9F also manifested that it will file the necessary attachments thereto, intends to comply with the appropriate penalties imposed for violating the same. complying with the requirements of SEC Memorandum Circular No. 19 alleging that its "Quick Peso" Online Lending Platform now substantially complies with the provisions of Memorandum Circular No. 19, i.e., it already Likewise, 9F however manifested that it is now in the process of to the amendment of its Articles of Incorporation may take four (4) to six (6) Extension on Submission of Requirements praying that it be given sufficient time to submit the same considering that one of the requirement which relates Weeks. On 11 October 2019, 9F, however, filed a Motion for Request of 10 (bid., Note 3 For: Motion to Lift Cease and Desist Orde: SEC En E Page 5 of 11 In the matter of: Quickpeso, Movar. AseN0.0-19-5 Comment on the Motion for Extension to Submit Requirements within five (5) days from receipt of the same. On 14 October 2019, an Order was issued directing EIPD to file its for the SEC to properly monitor its operations for regulatory purposes and to ensure that the public is not defrauded. a virtual office of the lending company. Consistent with the policy on full properly identify itself as the operator of a particular online lending application in order for the public to know the entity they are dealing with and the operator(s) of such online lending application as it practically constitutes disclosure and the principle of transparency, licensed lending company should Commission as part of its company name if it intends to operate as a lending company using such lending application as it would be doing business under said name or style. The foregoing will enable the SEC, as a regulator, to know Order dated 24 October 2019 argued that the online lending application being used by a licensed lending company should be registered with the EIPD in its Comment/Opposition to the Motion to Lift Cease and Desist a way that such lending application(s) could be used to commit violations of the Truth in Lending Act, Data Privacy Act, Unfair Collection Practices Rules and Regulations, and other relevant laws, rules and regulations. in operating an online lending application whose ownership cannot be determined or identified would likely cause significant injury to the public in EIPD also manifested that the continued practice of a lending company DISCUSSION We find the Motion unmeritorious. and the apparent violation of the right to privacy which subjected their debtors and/or complainants to public humiliation and ridicule. terms and conditions, misrepresented on the waiver of loan charges and fees, charged high interest rates, unilaterally implemented onerous and irrational unreasonable and abusive lending and collection practices, imposed and and Desist Order dated 12 September 2019 are the numerous complaints Operators, including Quick Peso which is operated by 9F committed received by the CGFD and EIPD from the public alleging that Online Lending It bears emphasis that one of the grounds for the issuance of the Cease of 2019, otherwise known as the Prohibition on Unfair Debt Collection On this note, Section 1 of SEC Memorandum Circular No. 18, Series For: Motion to Lift Cease and Desist Order In the matter of: Quickpeso, Movan SEC En Banc Case No. 09-19-054 Page 6 of I1 provides: Practices of Financing Companies (FC) and Lending Companies (LC) subject to the penalties provided herein: unscrupulous and untoward acts. Without limiting the shall constitute unfair collection practices, which shall be loan agreement, provided that, in the exercise of their rights and performance of their duties, they must observe good faith and reasonable conduct and refrain from engaging in general application of the foregoing, the following conduct TPSPs hired by them may resort to all reasonable and legally permissible means to collect amounts due them under the "SEC. 1. Unfair Collection Practices. - FCs, LCs, and a The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person; b. The use of threats to take any action that cannot Iegally be taken: C. The use of obscenities, insults, or profane language offense under applicable laws; the natural consequence of which is to abuse the borrower and/or which amount to a criminal act or d Disclosure or_publication of the names and other refused to pay debts, except as may be allowed under Section 2 hereof; personal information of borrowers who allegedly e. Communicating or threatening to communicate to any person 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; f. The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a borrower; g reasonable or convenient opportunities for contact. Making contact at unreasonable/inconvenient times for more than fifteen (15) days, or the borrower has given express consent that the said times are the only 9r hours, which shall be defined a contact before 6:00 A.M or after 10:00 P.M., unless the account is past due electronic or recorded means, may be given prior to, during, or after the execution of the loan agreement. Such consent which shall be evidenced by written, In the matter of: Quickpeso, Movar For: Motion to Lift Ce SEC En Banc Case No. 09-19-054 Page 7 of 11 and Desist Orde h Notwithstanding the borrower's consent, contacting (Emphasis supplied) shall also constitute unfair debt collection practices. the persons in the borrower's contact list other than those who were named as guarantors or co-makers Section 2 of the same Memorandum Circular, provides: confidential that data of the borrower, purposes of collection, FCs and LCs shall keep strictly "SEC. 2. Confidentiality of Information. - For XXX XXX XXX. (Emphasis supplied) for which reason, it can validly use its mobile lending application "Quick Peso" in providing loan services to the public. Nothing in its position would evidently show that 9F disprove or deny the commission of unfair debt collection practices under the above-quoted provisions. to refute allegations that it has not committed any unfair debt collection practices. 9F relied solely on the argument that it is an entity duly registered with and authorized by the Commission to operate as a lending company, and A careful review of the evidence submitted by 9F reveals that it failed is misplaced and devoid of legal basis. authority to operate and maintain an unregistered online lending application 9F's reliance on its Certificate of Authority as containing a grant of Lending Platforms, provides: otherwise known as the Disclosure Requirements on Advertisements of Financing Companies and Lending Companies and Reporting of Online Section 1 of SEC Memorandum Circular No. 19, Series of 2019. Platforms the following: "SEC. 1. Required Disclosures. -- FCs and LCs shall fully disclose in their Advertisements and Online Lending A. Corporate Name._ SEC Registration Number and conspicuous portion of their Advertisements and Online Lending Platforms; and Financing/Lending Company.(CA) Number in..a Certificate of Authority to Operate B. An advisory for their prospective borrowers to study the terms and conditions in the Disclosure Statement For: Motion to Lift Cease and Desist Order In the matter of: Quickpeso, Movan Page 8 of 11 SEC En Banc C N0.09-19-054 (Emphasis supplied) before proceeding with the loan transaction. Registration and Certificate of Authority to Operate Numbers in its advertisements and Online Lending Platforms. its borrowers important information relating to its Corporate Name, SEC No. 19, Series of 2019 constitutes misrepresentation as it effectively deprived 9F's refusal and/or failure to comply with SEC Memorandum Circular were informed of the terms and conditions and the disclosure or privacy Implementing Rules and Regulations of Republic Act No. 9474, provides: statement before proceeding with the loan transaction. Rule 6(b) of the Moreover, nothing in the records of this case show that 9F's borrowers "Rule 6. Amount and Charges on Loans XXX XXX XXX forth to the extent applicable, the following information: the consummation of the transaction, a lending company (b) In accordance with the Truth in Lending Act and prior to shall furnish each debtor a disclosure statement, setting I. Ih. IN. Vii. Viii. iX. V V Notarial fee; All other fees in connection with the loan transaction;P Service or processing fee, if any; Collection fee, if any; Description of the collection and lien enforcement Rate of interest of the loan: Any penalty charge for late amortization payment; The principal amount of loan; Amortization schedule; case of default." (Emphasis supplied) Method of calculating the total amount of obligation in procedures; and Regulation Act of 200711, its Implementing Rules and Regulations, carried with it a grant of authority to establish and operate an online lending specifically in the context of its position that its Certificate of Authority Memorandum Circular No. 19, Series of 2019 and the Lending Company application. The foregoing shows that 9F deliberately violated both the SEC without prior approval of the Commission, it also committed serious Thus, when 9F established and operated Quick Peso online application 11 Republic Act No. 9474 For: Motion to Lift Cease and Desist Orde: SEC En Banc Case No. 09-19-054 Page 9 of 1 In the matter of: Quickpeso, Movar misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public.12 Such misrepresentation is so grave that it warrants the suspension or revocation of the Certificate Registration of a corporation. Section 3 of the same SEC Memorandum Circular, provides: limited to the following information: Lending Platforms, within ten (10) days from the effectivity of this Circular. Said report shall include, but shall not be Department (CGFD) of the Commission an Affidavit of Compliance (SEC Form l - Existing Online Lending Platforms) containing a report of all their existing Online "SEC. 3. Report to the Commission. -- FCs and LCs shall submit to the Corporate Governance and Finance 4. 1. Name of Online Lending Platform/s; 3 Images of the Online Lending Platform/s as they appear Illustrations of the Online Lending Platforms showing how the required Disclosure and Advisory are displayed." Proof of compliance with Section 2 hereof; to the public; and XXX XXX XXX and maintain "Quick Peso" emanates from its Certificate of Authority and should be sustained, must fail. complied with the provisions of Memorandum Circular No. 19, Series of 2019. On the basis of the foregoing, 9F's argument that its authority to operate The records of the Commission reveal that to date, 9F has not yet to ensure that acts and/or activities violative of the said laws are immediately empowered to implement the provisions of, and to impose administrative sanctions for violations of Lending Company Regulation Act of 2007, its special laws, the Commission is authorized to issue Cease and Desist Orders stopped. Implementing Rules and Regulations, SEC Memorandum Circulars, and other Being the administrative and regulatory agency authorized and debtors has issued a number of CDOs to put an end to the unfair debt received relating to the abusive means of collecting the amount due from their In fact, the Commission, by reason of the numerous complaints it has 12 Sec. 6(i)[2] of Presidential Decree no. 902-A For: Motion to Lift Cease and Desist Orde: SEC'En Banc Case No. 09-19-054 In the matter of: Quickpeso, Movan Page 10 of 11 collection practices which are expressly prohibited under SEC Memorandum Circular No. 18, Series of 2019. Section 156, paragraph 1 of the Revised Corporation Code, 13 provides: "SEC. 156. Cease and Desist Orders. -- Whenever the such..person to.desist.from. committing.the.act constituting the violation." Commission has reasonable basis to believe that a person has yiolated, or is about to violate, this Code, a rule. regulation, or order of the Commission, it may direct XXX XXX XXX (Emphasis supplied) Desist Order filed by 9F Lending Philippines Incorporated is hereby DENIED for lack of merit. The CEASE AND DESIST ORDER issued against Quick Peso is hereby MADE PERMANENT. WHEREFORE, premises considered, the Motion to Lift Cease and and appropriate action. and published in a national newspaper of general circulation and furnished to all operating departments and offices of the Commission for their information Let a copy of this Resolution be posted in the Commission's website; applicable. collection practice of 9F and if necessary impose additional penalties, as Further, the CGFD is hereby directed to investigate the unfair debt Pasay City, 29 October 2019. SO ORDERED. 13 Republic Act No. 11232 For: Motion to Lift Cease and Desist Order In the matter of: Quickpeso, Movant SEC En Banc Case No. 09-19-054 Page 11 of 11 e EMILJO H Haifperson . AQUINO EPHYRO LUIS B. AMATONG Commissioner JAVEY PAUL D. FRANCISCO Commissioner KELVNLESTER K. LEE Commissioner KARLO S. BELLO * Commissioner *On Official Business