The Financial Services Authority (OJK) recently issued a new circular letter concerning the operation of P2P activities (SEOJK). The SEOJK was issued and became effective on 8 November 2023. The SEOJK regulates a few things but the most notable regulations in our opinion are related to (i) the limitation of maximum economic interests that can be received by the operators, (ii) guidelines for debt collection, and (iii) assessment obligations. This publication will briefly discuss such regulations.
Limitation of Maximum Economic Interests
The SEOJK sets a maximum economic interest that can be received by the P2P operators, i.e.:
- 0.1% per day over the loan amount, for productive financing, which would be applicable by 1 January 2024; this rate would be reduced to 0.067% by 1 January 2026, and
- 0.3% per day over the loan amount, for consumptive financing, which would be effective by 1 January 2024; this rate would be reduced to 0.2% by 1 January 2025 and 0.1% by 1 January 2026.
The economic interests include (i) interests/margin/profit-sharing, (ii) administration fee/commission fee/platform fee/ujrah, and (iii) other fees, excluding penalties for late payment, stamp duties, and tax.
As for the penalties for the late payment, the SEOJK also provides a limit on the penalties that can be imposed on the borrowers, i.e.:
- 0.1% per day over the loan amount, for productive financing, which would be applicable by 1 January 2024; this rate would be reduced to 0.067% by 1 January 2026, and
- 0.3% per day over the loan amount, for consumptive financing, which would be effective by 1 January 2024; this rate would be reduced to 0.2% by 1 January 2025 and 0.1% by 1 January 2026.
The total economic interests and penalties that can be imposed on the users (borrowers) should not exceed 100% of the loan amount. The SEOJK states that OJK can evaluate the percentage of the limitation over the years depending on the economic conditions and the development of P2P industries in Indonesia.
Guidelines for Debt Collection
The SEOJK sets ethical guidelines for debt collection in P2P businesses. The guidelines include among others the following practices:
- the debt collectors must bring official identification,
- the collection should not use threats (including physical and verbal), violence, or any humiliating actions,
- the collection should not be intimidating and degrading ethnicity, religion, race,
- the collection cannot be done to other parties aside from the borrowers,
- the collection can only be done from 8 AM to 8 PM; however, this collection hours can be waived if it has been previously agreed with the borrowers.
Assessment Obligations
The SEOJK emphasizes that the P2P operators must assess their users. The assessment process must also include observations on the fit and proper of the users, especially the borrowers – in their ability to repay the loan. The assessment of the borrowers would involve an assessment of their character and repayment capacity. The most important assessment that must be carried out by the operators is to ensure that the borrowers do not have active lending (loan) in more than three operators (including the relevant operator). After completing the assessment, the operators will notify the borrower whether they are deemed fit to participate as borrowers in the operators.
Miscellaneous
- Unhealthy Financing
The SEOJK prohibits P2P operators from conducting unhealthy financing. The unhealthy financing includes:
- imposing unreasonable terms and conditions, economic interests, or late payment penalties without considering the repayment capacity of the borrowers, or
- financing to a borrower who has more than three active lending (loan) with different operators.
- Transition Provisions
A facility agreement that has been signed before the issuance of the SEOJK would still be effective until the expiry date of such facility agreement. However, if such agreement needs to be amended, the amendment must comply with the requirements set out in this SEOJK.
Commentary
We view that the issuance of this regulation would bring a positive impact on the borrowers in a P2P lending business. The current P2P lending practice sometimes imposes overly high interest rates on the borrowers. In addition to the overly high-interest rate, some of the P2P operators also practice bad collection habit which involves among others violence and humiliation of the borrowers. The issuance of this SEOJK would hopefully bring a positive impact on the public’s interests and prevent cases where borrowers borrow money in many P2P operators without considering their repayment ability – so that the borrowers can be more responsible in applying for loan facilities through P2P operators.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
