Fintech's POJK Derivative Regulation: "Escrow Account" Is an Issue

In OJK's Hearing Meeting (RDP) held on (11/22), to get viewpoint from industry related to derivative regulation draft (SE) of POJK No 77/2016 regarding the Implementation of IT-based Money Lending Service (LPMUBTI), one of the interesting point for industry player is the limit of escrow account and virtual account usage for organizers. Industry players propose the extension of p2p lending for escrow account users to 60 days, or a removal.

In POJK's circular letter, mentioned the user's maximal fund placement period which can not be used for money lending transaction to escrow account is seven working days.

Escrow account is a bank checking account on organizer's name which is a deposit for specific purposes of debit and credit transaction from and to the IT-based money lending service users.

The organizer has no right to collect money from users in the form of deposit to escrow account as banking regulation.

Reynold Wijaya, Modalku's CEO and Co-Founder, said regarding escrow account regulation, it is not beneficial for the p2p lending industry player. Changing it into 60 days will certainly give space for industry players.

For him, if the time extended, regulators are worried about money laundry. However, with that purpose, he's afraid it is not possible. As no one wants to deposit money on escrow account without any interest.

"For seven days, is not an ideal period. This industry might not be growing," he said.

As for banking also against the regulation. In seven days, they must divert funds to other banks. It will surely affect bank liquidity.

He added, the p2p lending business is 100% under the banking system. Therefore, he finds the regulator doesn't need to add industry-burdening rules.

"p2p lending is alive by regulation but we can also drown by regulation. Please notice whether there is any objection"

Dickie Widjaja, Investree's CIO said similar thing. For him, if there is any concern of inactive lender, a time-limit is necessary. However, whether regulator wants to set a limit, 60 days is enough.

Collecting Opinions

Related to industry player about escrow account, Hendrikus Passagi, OJK's Organizing, Licensing and Controlling Director said the regulator will accommodate and consider some provisions which potentially burden the industry players.

"We always put transparent regulation of OJK. Every chapter we made always asks for player opinions. The existing draft has gone through a long process" he said.

From POJK fintech, at least six regulation will be included in the circular letter(SE). Regulator expects to complete all regulations no later than the end of this year.

"If the spirit is one [between regulator and industry players], OJK's circular letter can be finished. If you asking how fast, as soon as possible, yes"

At least two new drafts is being asked for public opinion. First, on LPMUBTI's implementation. Second, on LPMUBTI's Registration, Licensing and Institutions.

A few discussed points in the LPMUBTI's circular letter, among others are borrowing procedures and IT-based money lending service's contract, risk mitigation, consumer protection and resolution mechanism.

Meanwhile, discussed points in LPMUBTI Registration, Licensing and Institution's circular letter includes the requirements and procedures for organizer's permission of registration, licensing as well as revocation of business license and ownership changes.

- Original article is in Indonesian, translated by Kristin Siagian