The Securities and Exchange Commission (SEC) has penalised two online lending companies for separate violations related to misleading loan agreements and unfair debt collection practices.

The first company is LHL Online Lending Inc., which operates Pautang Online and Pautang Peso. Secondly, there is Link Credit Lending Investors Inc., which runs iPeso and Pesoin.

The SEC directed LHL Online Lending to pay a fine of PHP 129,000 for violating the Truth in Lending Act. An investigation by the SEC’s Financing and Lending Companies Department (FinLend) found that the company’s disclosure statements indicated loan terms of up to 210 days.

However, the department discovered that the company actually required borrowers to repay over a shorter period.

As a result of this practice, the company subjected borrowers to hidden surcharges for failing to pay within the shorter timeframe. The SEC order stated that the company’s “deceptive practices” had undermined the law’s intent to keep borrowers well-informed.

In a separate order, the SEC imposed a PHP 1 million penalty on Link Credit Lending for four counts of unfair debt collection practices, following over 200 complaints.

Investigators found the company sent insulting messages to borrowers and threatened to contact their co-workers regarding unpaid loans. FinLend found the PHP 1 million penalty to be “proper and precise” given the “gravity of the offence”.

FinLend put both companies on notice with stern warnings. For Link Credit, the department warned it would take more severe action against any future violations. As for LHL Online Lending, a future violation will result in the cancellation of its primary registration and operating licence.

Featured image by Freepik.