The Federal Competition and Consumer Protection Commission (FCCPC) has ordered all financial technology companies (FinTechs) to stop providing payment or transaction services to digital money lenders under its investigation.
Babatunde Irukera, FCCPC's Vice Chairman disclosed this on Thursday during a raid on Soko Lending Limited—a predatory digital money lender operating in Nigeria. Irukera said that the commission has secured orders to disable or diminish violators’ ability to circumvent regulatory efforts to protect citizens.
In June an expose by Nigerian Journalist, David Hundeyin revealed that the company's registered CAC address was fictitious and it had no licensing or regulatory approval from the Central Bank of Nigeria (CBN).
"Soko Lending appears to be the most consequential digital money lender with multiple apps and brand names covering a significant share of the digital/online lending market, and one of the most prolific actors in violating consumer privacy, fair lending terms and ethical loan repayment/recovery practices," Irukera said.
Following a series of complaints against Soko Lending Limited regarding data privacy violations, the National Information Technology Development Agency imposed a ₦10 million fine on the firm. However, its activities and that of other predatory digital lenders continue to persist in the country.
Earlier in March 2022, FCCPC closed down and froze the ban accounts of six other predatory loan operators—GoCash, Okash, EasyCredit, Kashkash, Speedy Choice and Easy Moni. Although the commission ordered Apple and Google to take down these companies’ apps from their platforms, these loan apps are still available on these platforms at the time of filling this report.
Even though the introduction of digital lending has provided a source of easily accessible credit to individuals whom the traditional financial system would have otherwise disenfranchised, the infiltration of digital lenders involved in predatory lending practices presents the need for the players in the space to actively curb the menace.
FCCPC has developed a Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending which has been adopted by the inter-agency Joint Regulatory and Enforcement Task Force as an interim step to establishing a clear regulatory framework for the sector.
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Most of these digital lenders offer loans as low as ₦5,000 and as high as ₦150,000, depending on the borrower’s track record, with repayment periods usually capped at 30 days and interest rates ranging from 20% to 28% a month.
The borrower is promised a gradual reduction in interest rates and an increase in credit limits in return for continuous patronage and timely repayment. Although the rates are almost never reduced, borrowers who have built their financial stability around these loan offerings keep going back, and the vicious cycle continues.