An Indonesian fintech association is not happy with online lending platforms that are charging high-interest rates from the users. The country has already adopted a cautious stand against online lenders and is planning to curb bad actors in the industry.
Who bears the brunt?
Two companies, including a P2P lender Do-It, have been sanctioned by the ethics council of AFPI, the industry association of fintech lenders. Both companies are regulated under the financial services authority (OJK). The sanctions come after the two companies were proven to be violating an OJK regulation that sets the maximum interest fee rate for online lenders. According to the rules, lenders can only charge an interest rate of 0.8% per day.
Do-It did not pay heed to the existing rules and charged an interest fee rate of 1% per day. The company provides consumer credit on small and medium-sized business It also partnered with one of the biggest digital payments platform company in Indonesia Ovo, which sought to increase its financial services offerings for users. Do-It will now be required to cut down its interest rate according to the current regulations. It has also been instructed to return the excess interest paid by the borrowers.
Violations will not be tolerated
The AFPI did not reveal the name of the second company sanctioned by them, suggesting that its violations were minor. Moreover, the company in question has already reimbursed its borrowers, unlike Do-It. The association noted that companies would be penalized if they do not follow the regulations set by the government.
They usually send a written warning to the company after they identify a violation. After that, a public announcement about the violation is made to “name and shame” the lender. Companies which continue to violate the rules will be temporarily kicked out of their membership in the association. If nothing else works, the company will get it’s operational licensed revoked and will have to shut down.
Indonesia has been tightening its grip around online lending platforms to bring more quality and integrity to the business. The country has also been alerting on ensuring that no consumers or business fall victim to unethical practices or fraud.
To combat these problems, the OJK requires online lending platforms to receive operating licenses from the IT ministry, provide customers with digital signatures, and cooperate with banks and microinsurance service providers. They are also expected to cooperate with credit scoring operators with OJK licenses. Lenders must also partner with Indonesia Fintech Association registered debt collection companies.