Loan app harassment supposedly decreases by 80%, as in 2024 the FCCPC will release debt recovery regulations.

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Harassment meted out on debtors by operators of loan apps and other digital money lenders has been reduced by 80 percent. This was revealed by the Chief Executive Officer (CEO) of the Federal Competition and Consumer Protection Commission (FCCPC), Babatunde Irukera.

According to the CEO, this sharp drop in reduction in harassment and defamatory messages from loan apps is attributable to the commission’s moves to curb the menace. These moves include the implementation of its interim regulatory framework, which prevents loan apps from harassing Nigerians.

He added that the limited and interim regulatory framework for the loan apps is still evolving because fintech is new and emerging across the world. He however decried the rising incidents of loan defaulting describing it as a serious industry issue that could lead to the collapse of the digital lenders that are also playing critical roles in the economy.

A picture of FCCPC Chief Executive Officer Babatunde Irukera.

While admitting that this could be because of the reduction in abuse and harassment, Irukera, however, refused to agree that the only means of debt recovery that works in Nigeria is abuse and harassment.

“One of the big issues that we’re seeing is that there’s now a significant level of loan default because people are not able to use these unethical and inappropriate loan recovery mechanisms and I’m insistent that you cannot say to me that the only language Nigerians understand is to abuse them. No, I disagree,” he said.

The CEO said the commission is working hard to find a more sensible way to recover loans because if digital money lenders are unable to recover their loans and eventually go out of business, it becomes a consumer protection problem because of those who need those types of short-term unsecured lending. He also revealed that new regulations would be made public in 2024.

“We have to find the balance, and so some of the regulations that will come out in 2024 will be a broader approach to responsible borrowing and responsible lending by individuals and corporate entities. I am hopeful that the future of what we’re building is that even school landlords will be able to report to a centralized credit system about the conduct of tenants, students, and parents so that we can know each person’s level of fiscal responsibility or credit wordiness,” he said.

Operations of loan apps in Nigeria

The emergence of digital money lenders, popularly called loan apps, has provided an avenue for Nigerians to access soft loans readily. These loans are instant and usually do not require collateral. They, however, struggle with debt recovery. This can be attributed to the poor purchasing power of Nigerians as a result of deteriorating economic conditions.

This means that digital money lenders require more stringent means to recover their money. As such, they resorted to abuse, harassment, and other ethically inappropriate means. The loan apps grant customers loans without collateral. They, however, require them to download their mobile apps, which enable the companies to gain access to their phone contacts.

The apps also activate a direct debit feature, so the companies can transfer money directly from the loanee’s account on the agreed repayment day. But when the loanee fails to meet up with repayment due to insufficient balance, the companies will start sending privacy-invading messages to the contacts. The contacts to whom the messages were sent didn’t know about the loan as they were not parties to the transactions, and neither did they consent to the processing of their data.

Many of them take it a step further by physically visiting the loanee and getting them apprehended, usually through non-state actors. This has led to clashes between the companies and the Nigerian regulators, primarily the National Information Technology Development Agency (NITDA) and the FCCPC.

In August 2021, Soko Loans became the first loan app to suffer the consequences when it was slammed with a N10 million fine by the NITDA for invasion of privacy and defamation of character.

In July, the FCCPC delisted Getloan and Camelloan apps for customer harassment. Both loan apps belong to Sycamore Integrated Solutions Limited, Orange Loan, and Purple Credit Limited.

While it is good to see an 80 percent drop in harassment and abuse by loan apps, it is also important that the FCCPC’s regulation perfectly addresses the matter of debt recovery. According to Babatunde Irukera, the commission is focused on eradicating the remaining 20 percent.