SEC CDO CASE NO. 01-22-078In the matter of: TACOLOAN; VCASH; 365 CASH; SWIPECASH; and BOOTCASHPetitioner-Movant, versus- ENFORCEMENT AND INVESTOR PROTECTION DEPARTMENT, Respondent.

Securities and Exchange Commission Republic of the Philippines Department of Financ:

COMMISSION EN BANC

IN THE MATTER OF :

TACOLOAN; VCASH; 365 CASH; SWIPECASH; and BOOTCASH

SEC CDO Case No. 01-22-078

DEPARTMENT (EIPD), ENFORCEMENT INVESTOR PROTECTION Movant. AND

X

RESOLUTION

Before this Commission is the Verified Motion to Lift Cease and Desist Order (the "Motion to Lift") filed' by Respondent TACOLOAN, through counsel, praying for the lifting of the Cease and Desist Order dated 03 February 2022 (the "Assailed CDO"), the dispositive portion of which, in part, reads:

CASH; SWIPECASH; and BOOTCASH, its owners, operators, "WHEREFORE, premises considered, TACOLOAN, VCASH, 365

promoters, representatives, agents, AND ANY AND ALL PERSONS

DIRECTED to IMMEDIATELY CEASE AND DESIST from CLAIMING AND ACTING FOR AND IN THEIR BEHALF are hereby

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.

TACOLOAN, VCASH, 365 CASH: SWIPECASH: and BOOTCASH, its owners, operators, promoters, representatives, agents, and any and all persons acting for and, in their behalf, are directed to CEASE and DESIST from offering and advertising their lending business through the internet or any other media, and to delete or remove any and all materials involving or covering the same.

RELEVANT FACTS

On 25 January 2022, the Enforcement and Investor Protection Department (EIPD) filed with the Commission En Banc, through the Office of the General Counsel, a Motion for the Issuance of a Cease and Desist Order.

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(the "Motion") against online lending operators/applications, which were found to be in violation of Republic Act. No. 9474 (the "Lending Company Registration Act of 2007"), and the relevant regulations issued by the Commission. TACOLOAN was included in the Motion, as one of the online lending operators/applications, that was found to have violated the relevant regulations.

On 3 February 2022, the Commission En Banc issued the Assailed CDO after finding, based on substantial evidence, that the online lending operators/applications, including TACOLOAN, were either engaged in the lending and/or financing business without being a corporation, and/or operating as such without the required Certificate of Authority, and/or have violated the relevant regulations issued by the Commission. In relation to Movant TACOLOAN, the Commission specifically found that it violated Memorandum Circular Nos. 18 and 19, series of 2019.

On 11 April 2022, TACOLOAN filed the instant Motion to Lift where it categorically and vehemently denied having violated the Lending Company Registration Act of 2007, arguing that Magician of Money Lending Corporation (MMLC), which owns and operates the online lending platform known as TACOLOAN, (a business name of MMLC) is a corporation duly registered with the Commission, having been issued a Certificate of

or Financing Companies.2 TACOLOAN also alleged that MMLC submitted Incorporation and Certificate Authority to Operate as a Lending Companies

an Affidavit of Compliance3 dated 11 March 2022 where it declared that registered as a business name.4 Thus, MMLC may lawfully engage in any TACOLOAN is an online lending platform owned by it, and has been lending activity, and the enforcement of the CDO against it is not warranted.

a duly registered corporation with a Certificate Authority to Operate as a Lending Company, it nonetheless operated TACOLOAN in violation of SEC denies the Motion to Lift of TACOLOAN on the ground that while MMLC is In its Comment/Opposition, the EIPD prayed that the Commission

MMLC, considering that the latter has not amended its Articles (AOI). Advertisements of Financing Companies and Lending Companies and Reporting of Online Lending Platforms). The EIPD also pointed out that the the claim of TACOLOAN that, it is already a part of the corporate name of Certificate of Incorporation of MMLC on record with the Commission belies Memorandum Circular No. 19, series of 2019 (Disclosure Requirements on

RULING

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

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At the outset, it should be pointed out that in the Assailed CDO, which TACOLOAN 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 that were issued relating to the operation of lending or financing business.

In our jurisdiction, the existing legislations5 which regulate the lending and financing business, all embody provisions where the State expressly recognized the essential and critical role of financing and lending companies in the development of the national economy, because they provide medium and long term credits for investments needed in starting a business, or in growing and developing an existing one. It is in this context that the State deemed it necessary to regulate their operations, to ensure that just like other financial institutions, the same are sound, competitive, stable, and efficient. Moreover, it should be emphasized that these legislations were intended among others, to curtail or prevent acts or practices that are prejudicial to the public interest.

Company Regulation Act of 2007, the Commission issued, among others, Memorandum Circular No. 18 s. 2019 (MC 18), which prohibits unfair debt As the agency mandated to implement the provisions of the Lending

platforms including existing lending companies that will engage in the same. and only allowed the operation of online 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, have the force advertisements and online lending platforms the information prescribed therein, and to report all their existing online lending platforms. The which imposed a moratorium on the registration of new online lending and effect of law. collection practices, and Memorandum Circular No. 19 s. 2019 (MC 19) Commission also issued Memorandum Circular No. 10, s. 2021 (MC 10), which required lending and financing companies to fully disclose in their

5 Republic Act. No. 9474, Republic Act No. 5980 (the "Financing Company Act of 1998), Republic Act. the standards that the law prescribes. No. 3765 (the "Truth in Lending Act") 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 regulation should be germane to the objects and purposes of the law and that it should conform to Administrative agencies are clothed with rule-making powers because the lawmaking body

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

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 "subordinate legislation" calculated to promote the public interest are necessary because of "the..

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

Moreover, the Certificate of Authority to Operate as a Lending Company (CA), which the Commission granted to MMLC, is in the nature of a license which equally requires the continued compliance by the grantee with all applicable laws, rules, and regulations, and may be revoked or rescinded on the basis of a finding of a violation of such laws, rules and regulations.

Factoran8, where the Supreme Court emphasize that licenses are not contracts among others. The reason for the foregoing was explained in Oposa vs

or property right protected by the due process clause of the Constitution, to Wit:

action. It is not a contract, property or a property right protected by the due "Needless to say, all licenses may thus be revoked or rescinded by executive process clause of the Constitution. In Tan vs. Director of Forestry, 25 this Court held:

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 utilization and disposition of forest resources to the end that public welfare case. : A timber license is an instrument by which the State regulates the

taxation (37 C.J. 168). Thus, this Court held that the granting of license does not create irrevocable rights, neither is it property or property rights (People property or a property right, nor does it create a vested right; nor is it vs. Ong Tin, 54 O.G. 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

the important contexts that the Commission considers in performing its The foregoing legal precepts and doctrinal pronouncements are among

of such privilege. Thus in order to enjoy such privilege, the requirements and procedure for the 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 by the statutes are complied with; therefor, any material statement in the Articles of Incorporation grant thereof must be strictly complied with. To this end, the State prescribes and gives notice. which is a falsehood may be considered fraudulent, regardless of the intent of the incorporators.c 7 "Incorporation is a grant of privilege from the State, and the State is entitled to preserve the value corporate franchise, and the certificate of registration may be acquired only if the conditions required

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mandate to fully implement the provisions of the Lending Company Regulation Act of 2007, and the other laws, rules, and regulations administered by it, to ensure that regulated entities fully comply with all statutory and/or regulatory requirements.

In the instant case, TACOLOAN maintains that the CDO should not apply to it because it has shown that MMLC, which actually owns and operates the online lending platform, is a registered corporation with a subsisting CA. TACOLOAN also argues that MMLC's submission of the

company compliant with applicable regulations. Affidavit of Compliance further justifies the lifting of the CDO, as it made the

The Commission is not persuaded.

While it is true that MMLC's Certificate of Incorporation and CA are

or any person for that matter, is shown to violate applicable regulations. the applicable rules and regulations issued by the Commission, to justify its issuance of a CDO restraining the further conduct of a lending business Certificate of Incorporation and CA, if the corporation, in this case MMLC. these are licenses issued by the State requires MMLC to fully comply with all continued enjoyment of this privilege granted by the State. In other words, the operated online or otherwise should be sustained notwithstanding a subsisting essential in validly conducting and operating a lending business, the fact that

this Commission that TACOLOAN and/or MMLC violated MC 18. terms and conditions upon its borrowers. The evidence presented by the EIPD shows that TACOLOAN harassed and threatened borrowers and used evidence was presented by TACOLOAN in the Motion to Lift. There is thus no cogent reason to reconsider and/or abandon the finding and conclusion of unfair and abusive debt collection practices that are expressly prohibited and penalized under MC 18, made misrepresentations, and imposed unreasonable offensive/foul language to exact payment of the loan amount. No contrary The records show that TACOLOAN and/or MMLC have employed

efficient basis, and in preventing acts or practices prejudicial to the public the services of third-party service providers to avoid liability for client harassment.9 The issuance and implementation of MC No. 18 were made pursuant to a valid exercise of the regulatory and supervisory power of the among others, of placing their operations on a sound, competitive, stable and interest. o lending and/or financing companies, specifically those who purposely engage Commission over lending and financing companies, to carry out its mandate, effectively address the abusive, unethical, and unfair collection practices of The Commission again emphasizes that MC No. 18 was issued to

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MC No. 18 was not issued to prevent lending or financing companies from enforcing a contractual obligation against its borrowers for debts lawfully made. After all, it is established both in law and jurisprudencell that a loan obligation should be fully satisfied or paid, especially in the context of the State's full recognition of the critical role of lending and financing

within the bounds of law and to protect or safeguard the privacy, dignity, and wellbeing of borrowers. Thus, violation of the provisions of MC 18, as what TACOLOAN in the instant case, merits the imposition of appropriate an additional source of credit.12 MC No. 18 was essentially issued to ensure companies, in providing medium and long-term credit for investments, and as that the collection of loans by lending and/or financing companies is made

sanctions, including the issuance of CDO, for the protection of public interest. among others.

lending platform was made in violation of MC 19. Commission holds that the same did not validly comply with MC 19 because the records disclose that the same was filed only on 11 March 2022, which is one (1) month after the CDO was issued on 3 February 2022, and which is has lapsed. Consequently, MMLC's operation of the TACOLOAN online four (4) months after the deadline prescribed for the registration of new OLPs In relation to the Affidavit of Compliance which MMLC submitted, the

AOI'.14 However, no such document was attached to the Affidavit of affidavits must be received with caution, to wit: the MMLC13 and that it was registered as a business name of MMLC based on its "AOI/Amended AOI/Receipt for the application for the amendment of Company, Inc. v. Tiamsonl5, the Supreme Court held that self-serving Compliance states that TACOLOAN is an OLP owned/operated/utilized by Compliance nor in the Motion to Lift. In Philippine Long Distance Telephone Furthermore, this Commission also notes that the Affidavit of

accept as adequate. There must be some other relevant evidence to "Although admissible in evidence, affidavits being self-serving must be received with caution. This is because the adverse party is not afforded any opportunity to test their veracity. By themselves, generalized and pro forma affidavits cannot constitute relevant evidence which a reasonable mind may corroborate such affidavits." (Emphasis supplied)

amended its Articles of Incorporation reflecting a change of corporate name There is nothing in the evidence on record that shows that MMLC

1 Jurisprudence tells us that one who pleads payment has the burden of proving it; the burden rests on the 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) 12 Ibid 13 Dor

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to include TACOLOAN as its business name. The current records of the Commission, which the En Banc takes administrative notice of, confirm that the business name TACOLOAN is not included as part of the business name of MMLC appearing in its corporate documents, including the General Information Sheet (GIS) for the year 2021.16

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

WHEREFORE, premises considered, the Verified Motion to Lift Cease and Desist Order filed by TACOLOAN is hereby DENIED for lack of merit. The Cease and Desist Order dated 3 February 2022 is hereby made PERMANENT.

Let a copy of this RESOLUTION be posted on the Commission's website, 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.

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

SO ORDERED.

Pasay City, Philippines; 24 May 2022

M

EMILIO B.AQUINO Chairperson

JAVEY PAUL D. FRANCISCO KEL 'TER K.LEE

Commissioner Commissioner

KARLO'S. BELLO Commissioner MCJILL BRYANT T. FERNANDEZ Commissioner