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OJK, fintech highlight key lending rules
Two peer-to-peer (P2P) lenders may lose their permits for alleged predatory lending practices in the country’s growing online lending business
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span>Two peer-to-peer (P2P) lenders may lose their permits for alleged predatory lending practices in the country’s growing online lending business.
The lenders’ names remain undisclosed for legal reasons but an Indonesian Fintech Lenders Association (AFPI) official said they were accused of charging interest higher than the maximum 0.8 percent per day flat rate stipulated by the association’s code of conduct.
“The association will confirm the evidence and complaints. If there are signs of a code violation, we will bring the case to the ethics council,” said AFPI managing director Kuseryansyah.
He said the council had four levels of punishment: sending members a written warning, reporting them to the Financial Services Authority (OJK), temporarily suspending them and permanently revoking their membership.
OJK fintech director Hendrikus Passagi, who noted the two lenders claimed there was “a miscalculation in interest rates”, told reporters in Jakarta that if the association revoked the lenders’ memberships, the financial watchdog would revoke their registration.
P2P lenders in Indonesia have been required to register with the OJK after the government agency issued regulation No. 77/2016. But P2P lenders’ interest rates were only capped in March when the association launched its code of conduct.
The code, which is available on the AFPI’s website, also caps interest rates and penalty fees at 100 percent of the value of the principal loan. Furthermore, lenders cannot directly collect debt 90 days after the loan is due.
Despite the OJK’s regulation and AFPI’s code, stakeholders still deem the P2P lending regulatory environment in Indonesia as nascent. Thus, the OJK is using the two fintech cases to raise consumer awareness about P2P lending while also putting a foot down on regulatory compliance.
Hendrikus said OJK regulations on lenders were based on three principles, which were “Don’t lose private data. Don’t make consumers lives harder. Don’t become a platform to fund terrorism and launder money.”
Drawing on the three principles, the OJK implements certain requirements for lender registration and more stringent requirements for licensing.
Registered lenders are, for example, required to work with local banks, have physical offices, enlist with the Communications and Information Ministry and have a minimum Rp 1 billion (US$70,296) in capital reserves.
There were 106 P2P lenders registered with the OJK as of April, according to an online list on the regulator’s website.
On top of registration requirements, licensed lenders need to work with licensed credit scoring companies, employ association-registered debt collection agencies, have ISO 27001 certification on data management and have a minimum of Rp 2.5 billion in reserves.
Hendrikus added that registered lenders were only allowed to access three features on users’ smartphones: the camera, microphone and GPS location, which the OJK deems sufficient for business operations.
However, AFPI’s Ivan Tambunan, the deputy chairman of the legal division, said several association members wanted access to more features, including app histories and call logs.
Accessing app histories allows lenders to check if debtors used other P2P lenders, which is a potential red flag, while call logs allow lenders to create credit scores by cross checking those of users’ close contacts.
“We want to propose that the OJK lets us access call logs but we can also offer a rule saying that call logs can only be used for credit scoring and not debt collecting,” said Ivan, who also cofounded P2P lender Akseleran.
He acknowledged that granting access to call logs was a prickly issue as unregulated lenders were notorious for bullying late debtors by calling their contacts. The AFPI’s code stipulates lenders must deal with late debtors by first sending written warnings, offering loan restructuring and long-distance communications before debtor visits.
The AFPI’s code of conduct also forbids members from using intimidation, physical assault and psychological bullying — including using racial, ethnic and religious slurs — to collect debt.
“I understand the OJK’s standpoint. It imposes restrictions to protect consumers. But we have to balance that with allowing the industry to innovate,” said Ivan.
