PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, SPENDCASH, TAPA and WITHU

Securities and Exchange Commission Republic of the Philippines Department of Finance Commission En Banc In the matter of: PESOBEE, RUSHLOAN, PESO T-SAFE ONLINE CASH, SKYMART, SPENDCASH, TAPA and WITHU SEC CD0 Case No. 02-22-080 ENFORCEMENT AND INVESTOR PROTECTION DEPARTMENT (EIPD), Movant, X +X CEASE AND DESIST ORDER Department (EIPD) on 7 February 2022 praying that a Cease and Desist Order ("CDO") be issued against PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, SPENDCASH,TAPA and WITHU (collectively (the "Motion") filed by the Enforcement and Investor Protection This resolves the Motion for Issuance of a Cease and Desist Order representatives and promoters, as well as the owners of the hosting sites referred to as the "Online Lending Operators"), their agents. of the Online Lending Operators, and any and all persons or entities immediately cease and desist from (a) operating, engaging in, carrying involved, directly or indirectly, in their operations, and directing them to out, abetting and/or promoting lending/financing business and related activities without the requisite license from the Commission, and (b) offering and/or advertising their lending business and related activities the internet and social media platforms the promotional materials used through the internet and any other media, and to delete or remove from to advertise their products and services. SEC OG THE DOCUMENTS ON RECORD CERTIFIED TRUE COPY Ot PAGE U PACES E PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 2 of 10 RELEVANT FACTS Department (CGFD) issued a Memorandum1 endorsing to the EIPD for On 31 January 2022, the Corporate Governance and Finance investigation and appropriate action the activities of, and the services provided by the Online Lending Operators that are available online through their respective mobile applications, and which are published and offered in their respective websites and social media accounts. The CGFD initially found that the Online Lending Operators are engaged in the lending and/or financing business without being a corporation and are Lending or Financing Company (the "Certificate of Authority"). operating without the required Certificate of Authority to Operate as On the basis thereof, the EIPD proceeded to conduct a formal investigation for possible violation of Republic Act No. 9474 or the Lending Company Regulation Act of 2007 by the Online Lending Operators which the Commission is mandated to administer and implement. For this purpose, the EIPD looked into the online lending applications as well as the social media accounts used by the Online Lending Operators, from which the EIPD was able to confirm that the Online Lending Operators are indeed actually operating, maintaining and are engaged in the lending business carried out online. Relative thereto, the EIPD alleged and presented evidence that the Online Lending Operators offer and provide loans to the public online through their respective applications/platforms, imposing onerous and performing acts which unreasonable terms and conditions, charging high interest rates, and violate the right to privacy of the lending business and related activities of the Online Lending debtors/complainants.2 The EIPD also presented evidence showing that Operators are being advertised and promoted online through Facebook actually availing the loans offered and provided by the Online Lending and other social media platforms, which have resulted in the public Operators. The EIPD also alleged in the Motion that its investigation confirmed that the Online Lending Operators are not registered with the Commission as a corporation, and does not have the Certificate of Lending Company Regulation Act of 2007 of all entities that are engaged in lending business/activities. Authority, which are both required by Republic Act No. 9474 or the Annex "A" of the Motion of Motion dated 31 January 2022. SES QGS Annexes "B"to "B-3" of Motion dated 31 January 2022 THE DOCUMENTS ON RECORD CERT[FJED TRUE COPYO D( 2 PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 3 of 10 On 2 February 2022, the CGFD, in response to the request of the EIPD, issued a Certification3 confirming that the lending applications of the Online Lending Operators are not included in the List of Financing and lending Companies with Online Lending Platforms (OLPs) reported to the Commission pursuant to SEC Memorandum Circular No. 19, Series of 2019.4 ISSUE Whether the evidence on record presented by the EIPD warrants the issuance of a CDO against the Online Lending Operators? RULING The Commission finds merit in the Motion and hereby grants the same. engaged in the business of offering and providing loans to the public, and allegations of the EIPD that the Online Lending Operators are actually are carrying out transactions proper to a lending company without a validly subsisting Certificate of Authority issued by the Commission. The pieces of evidence presented sufficiently support the 8799 or the Securities Regulation Code (SRC), thus: Commission is specifically provided in Section 5.1(a) of Republic Act No. The power and authority, as well as the jurisdiction of the "SECTION 5. Powers and Functions of the Commission. shall have the powers and functions provided by this 5.1. The Commission shall act with transparency and Code, Presidential Decree No. 902-A, the Corporation Code. the Investment Houses Law, the Financing Company Act and other existinglaws. Pursuant thereto the Commission shall have, among others, the following powers and functions: a Have jurisdiction and supervision over all grantees of primary franchises and/or a license or corporations, partnerships or associations who are the permit issued by the Government; Online Lending Platform 3 Annex "C" of the Motion of Motion dated 31 January 2022 4 Disclosure Requirements on Advertisements of Financing Companies and Lending Companies and.Reporting.o Iy OG CERTIFIED TRUE COPY OE HE DO UMENTS ON RECORD PC M PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 4 of 10 XXX Regulate, investigate or supervise the activities of persons to ensure compliance; XXX (n law as well as those which may be implied from, or Exercise such other powers as may be provided by which are necessary or incidental to the carrying out of the express powers granted the Commission to achieve the obiectives and purposes of these laws. (Emphasis supplied) In relation to the performance of its authority to investigate persons, and exact compliance with laws administered by it, the Supreme Court emphasized in Provident International Resources Corp. v. Venus,5 that the Commission has the concomitant duty to impose the appropriate sanctions/penalties for non-compliance, thus: "It can be said that the SEC's regulatory authority over private corporations encompasses a wide margin of areas, authority more vividly springs from the fact that a touching nearly all of a corporation's concerns. This corporation owes its existence to the concession of its responsibilities, the SEC may pass upon applications for, or may suspend or revoke (after due notice and hearing), certificates of registration of corporations, partnerships and association, and labor unions); compel legal and regulatory corporate franchise from the state. Under its regulatory associations compliances; conduct inspections; and impose fines or other (excluding cooperatives, homeowners penalties for violations of the Revised Securities Act, as well be warranted." (Emphasis supplied) as implementing rules and directives of the SEC, such as may Among the existing laws that the Commission is mandated to implement is Republic Act No. 9474, otherwise known as the "Lending Company Regulation Act of 2007" (the "Lending Company Regulation operating as lending companies should be registered as a corporation and should have a Certificate of Authority issued by the Commission, to Act"), Section 4 of which specifically requires that persons or entities Wit: SE OG 5 G.R. No. 167041, 17 June 2008 CERTIFIED TRUE COPY O FHEDO "uments on record U AK PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 5 of 10 "SEC. 4. Form of Organization. - A lending company shall be established only as a corporation: Provided That existing partnerships shall be disallowed from engaging in the lending investors organized as single proprietorships or business of granting loan to the public one year after the date of effectivity of this Act. granted an authority to operate by the SEC." (Emphasis No lending company shall conduct business unless and underscoring supplied) without being registered as a corporation and without a subsisting Certificate of Authority obtained from the Commission, engages in the The Lending Company Regulation Act penalizes any person who, business of a lending company, to wit: "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 imprisonment of not less than six months but not more than ten (1) years or both, at the discretion of the court, shall be imposed upon: 1 Any person who shall engage in the business of a authority to operate from the SEc. lendingcompany without a validly subsisting 2 The president, treasurer and other officers of the corporation, including the managing officer thereof, who shall knowingly and willingly: a Engage in the business of a lending company b without a validly subsisting authority to operate from the SEC; Hold themselves out to be a lending company other either through advertisement in whatever form, whether in its stationery, commercial! paper, or document, or through other C. representations without authority; Make use of a trade or firm name containing the the impression that it is engaged in the business of a lending company as defined in this Act without authority; and words lending company or "lending investor" or any other designation that would give the public d Violate the provisions of this Act." (Emphasis) supplied) $E OG THE DO CERTIFIED TRUE COPY OR UMENTS ON RECORD PAG PAGES PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN. SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 6 of 10 In relation to the lending business and industry, it bears emphasis that the Commission is mandated in Section 2 of the Lending Company Regulation Act to implement the policy of regulating lending companies to effectively prevent and mitigate the commission of practices prejudicial to public interest, thus: of the State to regulate the establishment of lending Companies and to place their operation on a sound, efficient "SEC 2. Declaration of Policy. - It is hereby declared the policy 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 public interest; and to lay down the minimum requirements and standards under which they may be established and do business." (Emphasis supplied) continued operation of the Online Lending Operators constitutes a clear violation of, and should be penalized pursuant to the Lending Company On the basis of the foregoing, the Commission finds that the Regulation Act because it engages in or carries out a lending business without the required license from the Commission. Moreover, the abusive collection practices, misrepresentations, and unreasonable agents and representatives are the very acts and practices that, as a matter of policy, the State seeks to prevent and penalize. terms and conditions imposed by the Online Lending Operators and their To ensure that the Commission is able to perform this mandate and issue a cease and desist order and to perform such other powers which are incidental or necessary in carrying out its mandate, to wit: to protect the public, Section 179(f) and (p) of the RCC authorizes it to "Section 179. Powers, Functions, and Jurisdiction of the Commission. - The Commission shall have the power and authority to: XXX XXXXXX f Issue cease and desist orders ex parte to prevent imminent fraud or injury to the public; XXX XXXXXX (p Exercise such other powers provided by law or those. which may be necessary or incidental to carrying-out C CERTIFIED TRUE COFYOI TUEJOCUMENTS ON RECORD Pt PAGFS PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 7 of 10 the powers expressly granted to the Commission. (Emphasis added) The certification issued by the CGFD, which the EIPD submitted as evidence, states that the Online Lending Operators are not registered with the Commission either as corporations, partnerships, or OPc. Neither is there anything on the records of the Commission that will show that these Online Lending Operators have been issued the Certificate of Authority which is required to validly engage in lending activities. The act of the Online Lending Operators in engaging in the lending business sans the required registrations/licenses constitutes a clear violation of Section 4 of the Lending Company Regulation Act, which warrants the imposition of the appropriate penalties provided under Section 12 of the Lending Company Regulation Act. Moreover, the evidence presented by the EIPD shows that the the latter are not registered as corporations, and have no Certificate of Online Lending Operators are illegally engaging in lending activities as constitutes actual fraud which was intentionally employed to lead the Authority issued by the Commission. Thus, the act of these Online Lending Operators in offering and providing loans to the public lending business which is not and has never been the case. public into the belief that they are legally authorized to engage in the Without the Certificate of Authority which is required under the Lending Company Regulation Act, the Online Lending Operators cannot offer and provide loans to the public. Lending Companies constitute unfair debt collection practices which are expressly prohibited under SEC Memorandum Circular No. 18, Series of Moreover, the abusive collection practices employed by the Online 2019 (Prohibition on Unfair Debt Collection Practices of Financing Companies and Lending Companies). As provided in the said Circular, the following conduct constitute unfair collection practices: a The use or threat of use of violence or other criminal means to harm the physical person, reputation or property of any person; 6 "Fraud is of two kinds: actual or constructive. Actual or positive fraud proceeds from an intentional deception practiced by means of the misrepresentation or concealment of a material fact. Constructive fraud is construed as a fraud because of its detrimental effect upon public interests and public or private confidence, even though the G.R. No. 161419, August 25, 2009). act is not done with an actual design to commit positive fraud or injury upon other persons." (Encinares vs Achero, S O TRUE COPYOR Itth ITS ON RECORD II AF PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 8 of 10 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 consequence of which is to abuse the borrower and/or which amount to a criminal act or offense under applicable laws; d. personal information of borrowers who allegedly Disclosure or publication of the names and other Section 2 hereof (exceptions to the confidentiality of refuse to pay debts except as may be allowed under information); 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 (exceptions to the confidentiality of information): 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; and g hours, which shall be defined as contact before 6:00 AM or after 10:00 PM, unless the account is past due Making contact at unreasonable/inconvenient times or for more than fifteen (15) days, or the borrower has reasonable or convenient opportunities for contact. given express consent that the said times are the only Such consent which shall be evidenced by written, electronic or recorded means, may be given prior to, during or after the execution of the loan agreement. On account thereof, the Commission finds and so holds that the issuance of a CDO is warranted in the instant case not only to stop an led by the Online Lending Operators to the belief that they are operating Commission under Section 179 (f) and (p), in relation to the SRC and the a legitimate business. This is a power that is expressly granted to the Lending Company Regulation Act. illegal act, but also to prevent the continued fraud on the public who are Ic QG CERTIFIED TRUE COPY O TuEI G JMENTS ON RECORE PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 9 of 10 The acts of the unregistered Online Lending Operators in illegally and subjecting its debtors to unfair treatment through abusive and even libelous language in collecting the loaned amount, have no place in a society that is governed by, and faithfully adheres to positive laws. The offering and providing loans to the public, charging high interest rates, Commission is duty-bound to strictly implement the provisions of the Lending Company Regulation Act, ensure that public interest is at all unauthorized or illegal lending activities. times upheld, and that the public is protected from persons who carry out WHEREFORE, premises considered, PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, SPENDCASH, TAPA and WITHU, 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 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. SPENDCASH, TAPA and WITHU, its owners, operators, promoters, PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, behalf, are also directed to immediately CEASE and DESIST from offering and advertising their lending business through the internet or any other representatives, agents and any and all persons acting for and, on their media, and to delete/remove any and all materials involving or covering the same. The EIPD is hereby DIRECTED to: 2 1. website, and the publication of the same in two (2) Cause the posting of a copy of this CDO in the Commission's newspapers of general circulation; Coordinate withtheappropriate cyber-criminal investigationandenforcement agency(ies) of the the responsible persons involved in the illegal online government in order to determine, identify, and apprehend operations of PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, SPENDCASH, TAPA and WITHU, person, agent, representative conniving with them. The EIPD is also directed to conduct an investigation to determine and including its author, creator, owner and its officers, or any and recommend the filing of a criminal complaint, if warranted; e O CERTIFIED TRUE COPY O JHE DOCUMENTS ON RECORD F 10 PESOBEE, PESO T-SAFE ONLINE CASH, RUSHLOAN, SKYMART, SPENDCASH, TAPA and WITHU SEC CDO Case No. 02-22-080 Cease and Desist Order Page 10 of 10 3. Submit a formal compliance report, by way of pleading, to the Commission En Banc within ten (10) days from receipt of this CDO. In accordance with the provisions of Sec. 64.37 of the SRC and Sec. 4- 3, Rule IV, Part II of the 2016 Rules of Procedure of the Commission, the parties subject of the Cease and Desist Order may file a Verified Motion to lift thereof within five (5) days from the date of its posting or publication. SO ORDERED. Pasay City, 10 February 2022 EMILIO B. AQUINO Chairberson EPHYRO LUIS B. AMATONG JAVEYPAUL D. FRANCISCO Commissioner Commissioner KEWVIN LESTER K.LEE Commissioner KARLOS.BELLO Commissioner file a formal request for a lifting thereof. Said request shall be set for hearing by the Commission not later than termination of the hearing. If the Commission fails to resolve the request within the time herein prescribed, the 7 Any person against whom a cease and desist order was issued may, within five (5) days from receipt of the order. fifteen (15) days from its filing and the resolution thereof shall be made not later than ten (10) days from the cease and desist order shall automatically be lifted. SEC DG CERTIFIED TRUE COPY OF THE DOCUMENTS ON RECORD PAGE AGE