CBK, data boss on the spot over rogue digital lenders
Central Bank of Kenya (CBK) and Office of the Data Protection Commissioner (ODPC) are on the spot as a growing number of Kenyans unable to access bank loans are harassed and “debt-shamed” by unlicensed online lenders if they default.
Digital lenders in Kenya still operate largely unchecked. Central Bank has so far licensed 22 DPS out of 381 applications since March 2022 and has engaged other regulators among them the ODPC, to safeguard interests of customers.
However, despite the existence of a law that gives CBK power over the previously unregulated Digital Credit Providers (DCPs), a number of rogue ones have run amok by incessantly sending messages to friends and relatives of loan defaulters in debt-shaming tactics to recover the loans.
The Business Hub has seen various types of correspondences from DCPs using threats and profane language in a bid to settle overdue loans, contrary to Central Bank of Kenya (CBK) regulations and warning from ODPC.
Debt collection
The law gives CBK powers to expressly bar digital lenders from using threats, violence, “obscene or profane language against customers or their references or contacts for purposes of shaming them” in the course of debt collection.
In one of the communications, a DCP going by the name Whitepath Company engages a defaulter threatening to expose her to her employer and friends if she did not settle the debt.
“We are sending this to all people in your phonebook contacts including your boss if you don’t clear now,” the company said in a message to the defaulter. The DCPs also harass people listed as referees cautioning them that their details, are used to obtain loans. “Kindly, take charge and control of your important details from being used by delinquent debt dodgers like…of ID….age 35 years, who used them when borrowing loan from us amount Sh12,600 and now is ignoring us” wrote one of the lenders.
“This serious defaulter could be going round online borrowing with many other apps and using your details as guarantor/ referee. You are the first referee to the said person, Forward the message immediately and tell the client to clear the loan now,” it adds. “Avoid being denied financial assistance from lending institutions because of this rogue client. Apologies for the very many messages you will receive until the client clear the loan.”
Last year, ODPC announced it had launched investigations on 40 digital credit providers for misuse of personal data following complaints from members of the public. “The ODPC wishes to notify the public that it is conducting preliminary documentary assessment and audit on 40 Digital Credit Providers (DCPs) whose practices regarding the processing of personal data has been raised to the Data Commissioner as complaints by various members of the public,” it said in a statement.
Data Commissioner, Immaculate Kassait reiterated ODPC’s commitment to protecting personal data and enforce compliance in the event of a breach of the laws.
Online lending
The CBK (Amendment) Act 2021, which was assented to by retired President Uhuru Kenyatta on December 7 last year, aims to see the growing online lending sector seek the approval of the Central Bank for the pricing of their loans, bringing them under the same rules as commercial banks.
The law came in the face of growing concerns about the predatory lending of the firms, with the borrowers not getting full access to information on pricing, punishment for defaults, and recovery of unpaid loans. In addition, the law prohibits digital lenders from accessing a customer’s phone book or contacts list and sending them messages in the event of debt default.
Debt collection agents have also been accused of threatening to tell their employers of loan defaulters in efforts to force them repay the loans. Borrowers share personal information, including their professions and monthly earnings, when registering with digital lenders.
