Curbing the excesses of rogue online lending platforms, By Zeenat O. Sambo


In Nigeria, the high interest rate demanded by many unregistered finance platforms perpetuates the notion of loan sharking, which is very disturbing and even fraudulent and unethical in loan transactions. Various unscrupulous practices have been devised to rip off customers through crazy interest rates that many are not well informed about before committing.

Primitive lending practice refers to face-to-face personal loan service, where the money that customers borrow is delivered to their doorstep, while they can also repay or save through the same process.

Globally, this process has now been digitized with the help of technology.

With the impact of emerging technologies on national economies, loan service providers have developed digital platforms using progressive web applications to replicate website performance and speed. Such applications can be quickly downloaded to a mobile phone by subscribers.

Due to the technology’s link to a support website, the lender can provide customers with all the necessary details about the loan agreement, repayments, and consent. As a result, clients can be assured that the application process meets all legal and compliance requirements.

Banks and other financial institutions in Nigeria charge different interest rates for loans to customers in various sectors of the economy. Many are unbearable and only a few are accessible. Because many bank loans are pegged at N100,000 (one hundred thousand naira) upwards, grassroots people cannot access loans from a number of banks.

These rural people are more comfortable with short-term loans that can easily be repaid without stress for the lenders, who are usually family members or friends. Thus, the advent of online lending platforms initially suggested a level of economic ease to unsuspecting Nigerians.

Given the relief of having online loan providers just a click away on their smartphone, little did subscribers know that these same life-saving loan apps could become detrimental to their finances and well-being.

The Federal Competition and Consumer Protection Commission (FCCPC) and other regulators have welcomed some of these platforms and service providers to bridge the lending gap to consumers who otherwise could not get loans. conventional loans from traditional financial institutions. These platforms have also facilitated the procedures for accessing short-term finance for many people.

In Nigeria, the high interest rate demanded by many unregistered finance platforms perpetuates the notion of loan sharking, which is very disturbing and even fraudulent and unethical in loan transactions. Various unscrupulous practices have been devised to rip off customers through crazy interest rates many of which are not well informed before committing.

Many borrowers agree to the terms and conditions of these loan sharks, unaware of the difficult financial situation they might find themselves in later. While some loan apps have attempted to regulate their interest rates, others have posed as professional cybercriminals, extorting their customers and ridiculing their image when they are unable to repay on time.

Recently, the FCCPC raided the premises of seven Lagos-based unlicensed online lending platforms. Following this, the operational premises of GoCash, OKash, EasyCredit, Kashkash, Speedy Choice, Easy Moni, Sokoloan were closed following the inter-agency monitoring exercise carried out by the Commission.

While some of the online lending operators have complained of huge losses due to some customers’ reluctance to repay their deals, many of these customers also see the lenders as financial tyrants who should be prosecuted.

In all this rumble, it is an abuse of the Nigerian tech ecosystem for, firstly, unlicensed lending apps to run freely over the years, and secondly, for borrowers to be subjected to naming and shaming , their privacy being violated in the name of loan recovery.

Nigeria, which boasts of the largest tech ecosystem in Africa, is therefore expected to have a centralized database of online financial institutions. However, several agencies have databases containing citizens’ biometric information.

This means that data and biometrics of citizens collected by various agencies such as the Nigerian Communications Commission (NCC), the Central Bank of Nigeria (CBN), the Federal Road Safety Commission (FRSC) and the National Identity Management Commission (NIMC), among others, should be stored in a central database easily accessible to competent authorities when needed. Thus, third parties could only access people’s data by applying existing data protection and privacy laws.

Moreover, without a centralized database, a dubious customer can borrow from around 10 different lending platforms at the same time, resulting in huge losses for online lending companies.

The creation of the Central Recovered Assets Database and the Central Criminal Justice Information System (CCJIS) to improve transparency in the fight against corruption in the country should also be anchored in the FinTech sector for transactions. traditional and digital.

FCCPC and CBN regulation of interest rates on loans by online lending service providers is necessary otherwise these companies would continue to devise unprofessional ways to extort exorbitant interest rates through direct debit from their client , which can ultimately be detrimental.

In its desire to curb the excesses of some of these loan companies, the National Information Technology Development Agency (NITDA) imposed a 10 million naira penalty on any online lending platform that acts on the level of data privacy invasion. But still many of them operate in violation of the Nigerian Data Protection Regulations (NDPR).

The recent crackdown by the FCCPC-led Joint Task Force has reaffirmed the need to check and balance the activities of online lending applications.

Online vendors such as Apple and Google stores are being urged by the federal government to shut down fraudulent online lending apps, but more specific measures need to be put in place to guard against future occurrences.

Online loan applications have been developed to help people get access to instant loans, easier and more convenient ways to get money from the comfort of their own home without hassle. In this regard, if properly regulated, it will benefit the economy and society as a whole.

Therefore, NITDA, CBN, FCCPC and other regulators should incorporate online lending companies with conventional banks as digital banking affiliates for immediate access to short-term loans by customers. Approved and recognized lending applications must operate in accordance with guidelines provided by relevant regulatory authorities.

It will also help NITDA maintain its NDPR, CBN maintain interest rate controls, and FCCPC ensure customers no longer experience harassment and privacy violations.

All other things being equal, the digital financial system is vital for economic growth and national development.

Zeenat O. Sambo writes from Abuja via [email protected]


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