T

he Financial Services Authority (OJK) has warned that it will take firm action against illegal peer-to-peer (P2P) lending financial technology companies, while urging people to fully understand the terms and conditions on the loans they borrow.

The OJK’s investment alert task force had halted the activities of 404 non-registered fintech companies as of November, said chairman of the team Tongam L. Tobing at a press briefing recently. The OJK routinely works with the Communications and Information Ministry to block the websites and applications of the illegal companies, he said.

“There are many [illegal fintech companies] coming from China, but a lot of them also come from Indonesia,” he said in Jakarta. “Those from China usually have representatives in Indonesia that open [bank] accounts here.”

Tongam said the OJK regularly announced the names of illegal fintech firms and collaborated with banks to terminate their financial access. It also followed up reports on their activities and provided the information to the National Police’s criminal investigation division (Bareskrim), he said.

In order to prevent people from falling victim to the illegal firms, the OJK urged the public to only conduct transactions with registered fintech P2P lenders under its supervision. As of Dec. 12, there were 78 registered P2P lending firms, based on OJK data.

The financial regulator said people should understand the terms and regulations before investing their money in those firms, as incoming reports showed that most complaints were about P2P customers not paying their loans on time. As a result, several customers were reportedly intimidated by debt collectors hired by the firms.

“In Indonesia, many problems related to P2P lending firms happen because borrowers do not pay their debts,” said Hendrikus Passagi, OJK director of licensing, regulation and supervision of fintech.

He said the local situation was completely different from other countries, such as in China, where most of the cases were about P2P lenders misusing loans paid by the borrowers.

Separately, Indonesian Fintech Association (Aftech) chairperson Niki Luhur lauded the OJK’s firm action against illegal P2P lenders, saying that the business group would even crack down on its delinquent members by revoking their membership if they were found guilty of practicing irresponsible lending that violated prevailing regulations.

The association said that all P2P lending companies registered as Aftech members had signed a code of conduct in August that would be a reference for them to run their businesses.

Niki said firm action from the regulator and association were important to help develop the growth of the registered P2P lending companies, which had grown significantly, partly because of OJK Regulation No. 77/2016 on information technology-based lending services.

“We have strongly supported the growth of P2P lending fintech in Indonesia in recent years. This proves the high customer demand to have quick, easy and secure loans,” he said.

In the first nine months this year, at least Rp 13.8 trillion (US$943.9 million) worth of loans were channeled by P2P lending companies. The figure confirms a World Bank and International Finance Corporation report, which stated that the lending gap in Indonesia reached $165 billion.

On Friday, the OJK’s investment alert task force and the Peer-to-Peer Lending Fintech Association (AFPI) met with representatives from the Jakarta Legal Aid Institute (LBH Jakarta) to clarify complaints from 1,330 victims of illegal fintech loans received from Nov. 4 to 25.

LBH Jakarta attorney Jeanny Sirait cited examples of alleged violations, such as reports from the victims that their personal data had been leaked without consent, and that their relatives and coworkers were disturbed by phone calls from debt collectors. They had even been verbally intimidated, slandered and sexually harassed, she said.

However, Hendrikus of the OJK said the LBH Jakarta only provided the initials of the alleged firms and declined to provide further details of the victims, making it difficult for the financial regulator to follow up the reports.

Jeanny said her side could not provide the details yet as it had made a commitment to the victims that their data would be kept confidential, and that it should gain their permission first before handing the documents to the OJK. (sau)