Digital lenders’ woes are adding up as The Data Protection Commissioner goes after those who have been engaging in debt shaming of defaulters.
The Data Protection Law of 2019 provides provisions that regulate the processing of personal data and information, but most digital lenders have been blatantly ignoring it.
During the signing process unto their lending platforms, the firms require that borrowers submit a certain level of personal information like salary earnings.
These mobile app-based lenders, most of whom are unregulated, have been reported to scrap information like contacts from the borrowers’ phones.
The Data protection acts states that “Infringement of provisions of the Kenya Data Protection Act (DPA) will attract a penalty of not more than Sh5 million or, in the case of an undertaking, not more than 1 percent of its annual turnover of the preceding financial year, whichever is lower.”
While in pursuit of their repayment, the lenders use the contact information as a means of debt-shaming the borrowers by sending messages to family members and friends.
Besides such loan recovery methods, these firms have also been known to share borrowers’ data with third parties for marketing purposes.
The Data Protection Act also requires that anyone who has access to user information informs them how their data will be used, and no sharing with third parties without consent.
A report earlier in the year from Ernst & Young showed that 41% of firms gave out their clients’ data to third-party service providers with 53% of these not getting the approval of their customers before sharing the data.
Thanks to the office of the Data Protection Commissioner, investigations have been launched into these firms over complaints from Kenyans.
“The Office received complaints from data subjects regarding digital money lending applications. Towards this end, my office has commenced investigations on a total of 67 such complaints in line with the office mandate,” said Immaculate Kassait, Kenya’s Data Commissioner.
The fight against these microlenders has been going on for quite some time now, with a current review of the Central Bank Amendment Bill of 2021 insisting that loans are private issues and petitioning for the revocation of licenses of all who engage in debt shaming tactics.
High-interest rates are a common phenomenon across easy access lenders, with many of them not revealing this information to borrowers during the registration process.
A combination of these factors has led to a surge in the number of defaulters, scores of them getting listed with credit reference bureaus.