Implementing Regulation of POJK 10/2022: The Introduction of SEOJK 19/2023

The Indonesian Financial Services Authority (“OJK”) released further implementing guidelines in general for the peer-to-peer (“P2P”) lending service business in the form of Circular of OJK No. 19/SEOJK.06/2023 of 2023 on The Organization Of Information Technology-Based Co-Funding Services (“SEOJK 19/2023”). The issuance of SEOJK 19/2023 serves as an extension of OJK’s earlier regulatory update on the P2P Lending Services business in Indonesia, namely Regulation of OJK No. 10/POJK.05/2022 of 2022 on Information Technology-Based Co-Funding Services (“POJK 10/2022”). The main provisions of SEOJK 19/2023 are elaborated below.

1. Business Activities of P2P Lending Service Organizers (“Organizers”)
   

Organizers[1] shall engage in the business activities of the (i) provision, (ii) management, and (iii) operation of an Information Technology-Based Co-Funding System (“LPBBTI”).[2]

In regards to (i) provision, Organizers shall provide, among other things, the following facilities:

a. Escrow account and virtual account/payment gateway;

b. Risk analysis;

c. Identity verification for both fund providers and fund recipients LPBBTI (“LPBBTI Users”) and document authenticity;

d. Risk transfer for funding and/or collaterals;

e. Complaint facilities; and

f. Information relating to funding for Users.[3]

In regards to (ii) management, Organizers shall manage the following:

a. Verification of User identity; and

b. Processing of User data and other personal data,

in accordance with the business organization activities, distribution of funds from fund providers to fund recipients, payment of funding from fund recipients to fund providers, and execution of collection to fund recipients.[4]

In regards to (iii) operation, Organizers shall operate their electronic system of the LPBBTI.[5] 

2. Registration Process to Become Users of LPBBTI

Prospective Users must abide by the following steps in order to become a registered fund provider or fund recipient:[6]

Further, prior to the registration of a prospective User (as aforementioned in Step 1 above) Organizers must notify prospective Users (through display on the Organizer’s electronic system) of certain matters that require the attention of the Users , among other things, the following:

a. LPBBTI is the organization of financial services to bring together fund providers with fund recipients in conducting funding conventionally or based on Sharia Principles directly through the electronic system by using the internet;

b. Organizers shall be licensed and supervised by OJK;

c. Organizers may only access, obtain, store, manage, process, and/or use the personal data of a User after obtaining approval from the User; and

d. The fund provider shall bear all funding risks arising in LPBBTI transactions. Organizers are responsible in the event of negligence or errors caused by the Organizer and cause losses to the fund providers.[7]

3. Maximum Limit of Economic Benefit

For Organizers to facilitate the funding, they must comply with the maximum limit of economic benefit (rates and fines) for funding. Economic benefits that Organizers charge include (i) interest/margin/profit sharing; (ii) administration fee/commission fee/platform fee/ujrah which is equivalent to the said fee; and (iii) other fees, in addition to late fines, stamp duty, and tax.[8] These limits are per calendar day from the funding value set in the funding agreement and dependent upon the type of funding, as follows:[9]

However, it should be noted that the maximum limit of economic benefits may be evaluated by OJK periodically by taking into consideration the condition of the economy and the development of the P2P lending service business.[11]

4. Collection

Organizers may either perform collection (i) independently or (ii) by appointing another party to conduct the collection.[12] Types of collection methods include:

a. Desk collection (indirect collection such as messages, phone calls, and video calls); and/or

b. Field collection (face-to-face direct collection).[13]

Under the circumstance that the Organizer appoints another party, such other parties must have human resources that possess certification in the fields of collection from a professional certification agency registered with OJK.[14] Organizers are fully responsible for any impacts arising from any appointment of other parties.[15] Further, such appointment must be in the form of a written agreement and subject to periodic evaluation. The collection agreement must at least contain the following information and provisions:

a. Scope of work;

b. Term of agreement;

c. Contract value;

d. Fee structure and payment mechanism;

e. Rights, obligations, and responsibilities of Organizers and the appointed party, among other things:

i. Authority of Organizer to evaluate and examine the appointed party for the collections conducted;

ii. Obligations of the appointed party that include the workforce employed to maintain the confidentiality and security of information of Organizers and/or Users;

iii. Obligation of appointed party to submit reports and information to the Organizer periodically and in writing;

iv. Compliance of the Parties with prevailing laws and regulations;

v. Obligations of the Parties to protect the rights and interests of Users;

vi. Obligation of the appointed party to have a contingency plan; and

vii. Willingness of the appointed party to provide examination access to OJK and/or other authorized authority jointly with the Organizer (if necessary);

f. Size and standard of work implementation;

g. Criteria or conditions for termination of the agreement before the expiration of the agreement period (i.e., early termination);

h. Sanctions and penalties; and

i. Dispute Settlement.[16]

During the course of collection, all collection personnel must abide by certain principles inter alia the following:

a. Use an official identity card accompanied by a photo of the relevant personnel;

b. Prohibited to use threats, violence, and/or actions that are disgraceful to the fund recipient;

c. Prohibited to use physical or verbal pressure;

d. Prohibited from collecting from parties other than the fund recipients;

e. Only collected through private channels, at the collection address, or domicile of the fund recipient; and

f. Only collected from 8.00 A.M. to 8.00 P.M. in the time area of the address of the fund recipient.[17]

[1] Indonesian legal entities that provide, manage, and operate P2P whereby such entities gather fund providers and fund recipients through a shared electronic platform.

[2] An electronic system that organizes the gathering of fund providers and fund recipients with the purpose of funding transactions.

[3] Section II Article 2 of SEOJK 19/2023.

[4] Section II Article 3 of SEOJK 19/2023.

[5] Section II Article 4 of SEOJK 19/2023.

[6] Section IV Article 3 of SEOJK 19/2023.

[7] Section IV Article 1 of SEOJK 19/2023.

[8] Section VI Article 2 of SEOJK 19/2023.

[9] Section VI Article 3 of SEOJK 19/2023.

[10] Funding for businesses that produces goods and/or services, including business that provides added value and increase of income for fund recipients. Examples include invoice financing, procurement of purchase orders, procurement of goods for online sales, business capital facilities, or project funding. (Elucidation of Article 25 Paragraph (1) Letter (a) of POJK 10/2022).

[11] Section VI Article 6 of SEOJK 19/2023.

[12] Section XI Article 1 of SEOJK 19/2023.

[13] Section XI Article 4 of SEOJK 19/2023.

[14] Section XI Article 5 Letter (b) of SEOJK 19/2023.

[15] Section XI Article 8 of SEOJK 19/2023.

[16] Section XI Article 7 of SEOJK 19/2023.

[17] Section XI Article 5 Letter (d) of SEOJK 19/2023.