DLak mulls code of ethics over licensing
Lewis Njoka @LewisNjoka
Digital Lenders Association of Kenya (DLAK) are proposing that lenders be regulated through a code of ethics as opposed to a licensing framework.
The group’s proposal comes even as a law currently in Parliament, the Central Bank of Kenya (Amendment) Bill of 2020, seeks to have all mobile loan providers licensed by the Central Bank of Kenya.
Under the arrangement proposed by the study, all consumer credit providers would be required to be registered, not necessarily licensed, with a relevant regulator to monitor their conduct and take enforcement measures in the event of violation of the code.
Monitoring conduct
Hence, all non-deposit taking providers of credit will be bound by a set of consumer protection principles.
“A more appropriate regulatory model would be one that enhances consumer protection through regulation of the conduct of credit providers over the digital lending platforms.
This can be achieved through the development and enactment of a consumer credit code that embeds the principles of consumer protection in lending,” said DLAK chairman Kevin Mutiso.
Mutiso’s views were supported by PricewaterhouseCoopers Associate Director and Head of Regulatory Compliance, Joe Githaiga, who said consumer protection would work better than financial regulation.
“It is our view that the CBK, having been mandated with the regulation of non-bank financial lenders, should take an approach focused on the protection of the consumer, rather than financial regulation of the lenders,” Githaiga said.
The study carried out by PricewaterhouseCoopers (PwC) on behalf of DLAK ruled out prescribing of a prudential licensing framework, saying it would increase the compliance burden for lenders, the costs of credit for consumers and monitoring burden for the regulator.
Some of the key consumer protection principles to be embedded in the recommended consumer credit code include, transparency, fairness in dealings with consumers, transparent pricing, disclosure of key terms and conditions and restrictions on certain debt collection practices.
