Debt Shaming Digital Lenders Will Have Their Licenses Revoked By Central Bank

central bank of kenya

Digital lenders will have to operate under the same laws that bind the business of commercial banks, once all the changes in the Central Bank Amendment Bill of 2021 are effected, and it passes to law.

Digital loans have cultivated a bitter-sweet relationship especially with those that are majorly unbanked, and the parliamentary committee on Finance and National Planning has backed plans to have them tamed.

In a new clause added to the Bill, the Central Bank will be given further authority to revoke licenses provided to these digital lenders if they are found to have breached the confidentiality of the information that their users provide.

Despite the Data Protection Bill of 2019 being signed to law, most lenders have been employing unscrupulous means to ensure that borrowers repay their loans.

It has been a perennial song of reports from users claiming that several of these companies have gone the extra mile like reaching out to a borrower’s contact list to enforce their loan recovery efforts.

The Central Bank in the past has banned some of these apps from listing with the credit reference bureaus and Google complemented this move by imposing further restrictions for listing on the Play Store.

Surprising or not, the apps almost always find a way to survive these measures.

The popularity of online loans is fuelled by the fact that they do not require any form of security, and this can be attested by the 2 million Kenyans who are now online borrowers.

In addition to debt shaming, scrapping, and sharing data of their users with third parties, many of these lenders do not disclose all the necessary information to their borrowers.

This is ironic considering that the lenders themselves require a lot of personal information before handing out the loans.

In light of this, the Central Bank will also have the authority to revoke or suspend the licenses of those digital lenders who do not reveal complete information like interest rate charged, punishment for defaulting on loans, and the means they will use for recovering their money.

This is a requirement that is stipulated in the Consumer Protection Act.

“The bank may suspend or revoke a license by written notice to the holder of the license, if the licensee (digital lender) is in breach of subsection (2A) or the conditions of the Data Protection Act or the Consumer Protection Act,” says the Bill.

New digital lenders seeking to make entry into the Kenyan market will also have to measure up to the new regulations, including now having to get clearance from the Data Commissioner before they are awarded a license.