INSIGHT
Newsletter - The legal implications of Fintech Lending Platform Liability in the Event of Default based on the newly issued POJK No. 40 of 2024
On 27 December 2024, the Financial Services Authority (“OJK”) promulgated Financial Services Authority Regulation No. 40 of 2024 on Information Technology-Based Joint Funding Services (“POJK 40/2024”). This regulation enhances the framework for information technology-based joint funding services (“P2P Lending Services”), including, provisions on mitigating non-performing loans to ensure a more secure lending environment. This newsletter provides an overview of the liability of P2P Lending organizers (“P2P Organizer”) in the event of default based on key provisions of POJK 40/2024.
POJK 40/2024 defines P2P Lending Services as the service to bring together fund providers and fund recipients in carrying out funding, either conventionally or based on Sharia principles, conducted directly through an electronic system. This means they serve as an intermediary to connect the fund providers (“Lenders”) with fund recipients (“Borrowers”) for financing purposes.
Understanding P2P Organizer’s Position
The P2P Organizer's position in the case of default is generally related to its fulfilment of contractual obligations with the Lender and the obligations imposed under POJK 40/2024.
a. Contractual Relationship in P2P Lending Services
In P2P Lending Services, essentially, there are two agreements that must exist between:
i. The P2P Organizer and the Lender; and ii. The Lender and the Borrower.
b. Key Obligations under POJK 40/2024
POJK 40/2024 obliges P2P Organizers to fulfill the following (“Key Obligations under POJK 40/2024”):
i. Ensuring agreements include the provisions required, including, rights and obligations, funding amount and economic benefits, commission fees, repayment collection mechanism, and risk mitigation in case of default.
ii. Complying with the funding limits, depending on the types of funding (i.e., consumptive or productive) and for new funding channels.
iii. Having risk mitigation, in the form of: (i) analysing the risk of funding, (ii) conducting verification of the identity as well as document authenticity, and (iii) conducting funding collection.
Additionally, the P2P Organizer may also facilitate risk transfer of the funding and collateral object.
iv. Conducting credit scoring, including, document verification and analysing the prospective Borrower.
Implications in the Event of Default and Other Risks
1. Breach of Contract Lawsuit
The P2P Organizers may be exposed to the risk of a breach of contract lawsuit if they fail to fulfil the obligations under the agreement between the P2P Organizer and the Lender in accordance with Article 1243 of the Indonesian Civil Code (“ICC”)
2. Tort Lawsuit
In general, P2P Organizers may also face the risk of a tort lawsuit by any party in accordance with Article 1365 of the ICC, which holds a party to be liable for unlawful acts that cause damage to another party. This risk may arise, among others, if the P2P Organizer fails to fulfil its Key Obligations under POJK 40/2024.
3. Administrative Sanctions from OJK
P2P Organizers may also be subject to administrative sanctions ranging from a written warning to an administrative fine of up to Rp 50 million for violations of the Key Obligations under POJK.
The P2P Organizer's liability in the event of default is determined by its adherence to contractual obligations and compliance with the mandates set forth under POJK 40/2024
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NOTE
This article provides general information and does not constitute legal advice. Readers should seek specific legal counsel for their circumstances.
