SEC penalizes LHL Online Lending for misleading loan deals

​The Securities and Exchange Commission (SEC) has fined LHL Online Lending Inc., doing business under the names and styles of Pautang Online and Pautang Peso, for providing misleading information in its loan agreements.

In an order dated July 17, the SEC Financing and Lending Companies Department directed LHL Online Lending to pay a fine of P129,000 for its violation of Republic Act No. 3765, or the Truth in Lending Act (TILA), as implemented by SEC Memorandum Circular (MC) No. 7, Series of 2011, following multiple complaints lodged before the Commission against the company and its online lending platforms. MC 7 provides for the implementation of the TILA to enhance loan transaction transparency.

Section 4 of the TILA states that any creditor shall furnish borrowers, prior to the consummation of the transaction, a clear statement in writing the information on the cash price of a property or service, amount to be credited, and charges due to the borrowers, among others.

An investigation by FinLend showed that loan payment terms indicated in the company’s disclosure statement to borrowers would be 150, 180 or 210 days. In reality, however, LHL Online Lending provides its borrowers a shorter period to repay. Borrowers are then subjected to hidden surcharges and interest for failure to pay within the shorter timeframe.

“The intent of the law, which is to ensure that borrowers are well-informed about the agreements they enter into, has been undermined by [LHL Online Lending’s] deceptive practices,” the order read.

“Worse still, borrowers were misled into agreements through misleading information that made them appear to be wise choices, when in fact, they were not,” it added.

Subsequent violation, if any, will result in the cancellation of the LHL Online Lending’s primary registration and certificate of authority to operate as a lending company, according to FinLend.