OJK ISSUES NEW REGULATIONS IN RELATION TO P2P LENDING

AP-LH/001/I/2017

Introduction

OJK has introduced new rules regarding Financial Technology (Fintech) ie OJK Regulation Number 77/POJK.01/2016 concerning loan based lending services through online platforms (“POJK 77/2016”) on December 28th, 2016.

POJK 77/2016 relates to the provision of financial services by bringing together lenders and debtors to perform loan and lending agreements in IDR directly through an electronic system via the Internet.

In a press conference, OJK stated that POJK 77/2016 is expected to support the growth of loans and lending money based on information technology or Fintech Peer-to-Peer (P2P) lending. OJK viewed P2P as an alternative new source of financing for people who have not been able to be served optimally by the conventional financial services industry such as banks, capital markets, finance companies and venture capital funds.

Summary

The OJK regulation considers the electronic platform or service provider as an Organisers (“Organizer”), not as a lender but only bringing together creditors and borrowers. In this case, the Source of the loan funds must come directly from the creditors themselves.

The organizer can work together with the creditor by entering into agreements for the provision of money borrowing services through the information technology. OJK stipulates that the electronic documents must at least contain:

1. Agreement number;
2. Date of agreement;
3. The identity of the parties;
4. Provisions on the rights and obligations of the parties;
5. Loan amount;
6. Interest rates on loans;
7. Number of commission;
8. Time period;
9. Details of related costs;
10. Provisions on fines (exception);
11. Dispute resolution mechanism;
12. Settlement mechanism in case organizers are unable to continue the operations.

The agreement can be signed by using electronic signatures.

The organizer must also be registered as a designated member by OJK. The organizers may take the form of a limited liability company or cooperative. In cases where the organizer is a foreign legal entity or a foreign citizen, share ownership cannot exceed 85%. The organizers must have a paid-up capital of at least Rp. 1.000.000.000 and at the time of applying at least Rp. 2.500.000.000. The organizers must apply for registration and license to OJK.

The organizers are required to meet the maximum limit of total lending of funds to each debtor in the amount Rp. 2.000.000.000. In the order to facilitate borrowing and lending services, the organizers must also provide an escrow account and virtual account.

The organizers must provide a virtual account for creditors to send the money to. The organizers must also provide an escrow account to Which the borrower must send back the funds to repay their loans.

The organizers are also required to prepare Monthly reports and annual report electronically. These must be submitted to the OJK.

Administrative sanctions for violation of obligations in POJK 77/2016:

1. Written warnings;
2. Penalty;
3. Restriction on business activities;
4. Revocation of permission.

Since the issuance of POJK 77/2016, the agreements for the provision of money borrowing services based on information technology is still ongoing and loans which are over the limit in value continue to be valid until the expiration of that time period.

Conclusion

Since the existence of POJK 77/2016, OJK supports the development of digital economic innovation in the future. OJK is attempting to control companies who organize P2P money borrowing services online. The creditor must work together to another creditor All stakeholders, including lenders and borrowers, must work together so the organizers can open access to loan funds from both domestic and overseas sources.