Debt-shaming digital lenders will have their licenses revoked by the central bank

Digital lenders will need to operate under the same laws that bind the activities of commercial banks, once all of the changes to the Central Bank Amendment Bill of 2021 are implemented and enacted.

Digital loans have cultivated a bittersweet relationship, especially with those who are predominantly unbanked, and the parliamentary finance and national planning committee has backed plans to tame them.

In a new clause added to the bill, the central bank will have more power to revoke the licenses provided to these digital lenders if they are found to have violated the confidentiality of information provided by their users.

Despite the signing of the 2019 Data Protection Bill, most lenders have used unscrupulous means to ensure that borrowers repay their loans.

This is a perpetual song of user reports claiming that several of these companies have gone the extra mile, such as reaching out to a borrower’s contact list to apply their loan collection efforts.

In the past, the Central Bank has banned some of these apps from registering with credit bureaus, and Google has supplemented this decision by imposing new restrictions on registration with the Play Store.

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

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

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

This is ironic given that the lenders themselves need a lot of personal information before they distribute the loans.

In light of this, the Central Bank will also have the authority revoke or suspend the licenses of digital lenders who do not reveal complete information such as the interest rate applied, penalties for default and the means they will use to get their money back.

This is a requirement stipulated in the Consumer Protection Act.

“The bank may suspend or revoke a license by written notification to the licensee, if the licensee (digital lender) violates paragraph (2A) or the conditions of the Data Protection Act or the Data Protection Act. consumer protection, ”says the bill.

New digital lenders looking to enter the Kenyan market will also need to comply with new regulations, including now having to get permission from the data commissioner before getting a license.

About Dawn Valle

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