ONYEKORMAKA ASABOR writes on the protection of customers from fintech borrowers’ unethical tactics
A colleague (name withheld) took a loan from a financial technology company without my knowledge. Consequently, when he was considered to have defaulted in the repayment, I started receiving text messages that read, “Mr. XYZ, with the number 080XXXXXXXX got a loan and it is 18 days overdue. Kindly help notify him for repayment. Thanks.”
Almost on a daily basis, Nigerians, who patronised money-lending fintechs have been receiving such text messages.
Another version of the threatening text messages goes thus, “Your friend, Mr XYZ, is a dubious person, a thief and a fraudster who has been defrauding people for weeks now. This person obtained a loan from our company, but has refused to pay back. He has totally refused to pick our calls. Be informed that this person has been declared wanted. He gave us your details and listed you as a guarantor. Please advise him to pay up or face jail term. If he does not, it will affect you and him negatively, as we shall take all legal steps to retrieve our money from this criminal.”
Threats and slander
The foregoing text messages are unarguably threatening and slanderous, even as they typify the height of character assassination and cyberbullying by burgeoning fintech lenders.
Ordinarily, these fintech companies purport to grant their customers uncollateralised advances, requiring applicants to download the their mobile applications and initiate a direct debit, which grants the application access to the customers’ phone contacts. The foregoing invasion of privacy is made possible, as these loan companies reportedly entrench trackers sharing data with third parties without acquainting customers of the information within their applications.
Due to the extreme rates charged by the companies, non-payment by customers is commonplace; hence the lenders send embarrassing text and Whatsapp messages to shame the defaulters and their contacts, unscrupulously publicising the details, including the defaulters’ full names, phone numbers and pictures, in what is supposed to be a private transaction.
Tampering with personal information
Nigerians, who patronise money-lending fintechs (a.k.a. loan sharks), are exploited by the firms that resort to illegal tactics to recover loans. The fintechs allegedly lie against defaulting consumers, invade their privacy and violate their other rights.
Loan sharks are reputed for exploiting their customers’ personal data, sharing them with third parties.
Legal experts are unanimous with the view that accessing borrowers’ contact lists for the purpose of public shaming is unlawful because the borrowers did not expressly consent to the invasion of their privacy for that purpose.
In December 2021, the Chief Executive Officer of Pocketfuel, Fome Amaye, vehemently frowned upon the crude method some fintech lenders adopt to recover loans. He described the firms’ act of harassing, embarrassing and sharing confidential information of customers in a bid to recover bad debts as unethical.
Amaye, whose company is equally in the business of offering short-term financial relief to individuals, small businesses and associations, urged fintech lenders to be committed to responsible lending processes in Nigeria.
According to him, loan financiers are not allowed to threaten, harass or publicly shame debtors or disclose their personal information through any medium.
His words, “Anyone can lend money, if they have it in excess and are willing to part with it for a given period. However, not everyone is accredited, and thus not many who have both ability and willingness to lend are regulated.”
Advising fintech lenders, as financial service providers that bridge the lending gap, to always exhibit care in lending to customers, he urged them to avoid misleading advertisements of their products and communicate their terms and conditions clearly.
“It is the lender’s responsibility to keep borrowing customers’ information confidential. Information provided during the application process is not used for any other purpose than what the customer provided,” he added.
CBN to the rescue
To lessen the escalating rate of defaults by borrowers, enhance loan recovery by financial institutions and generally improve creditor confidence in Nigeria, the Central Bank of Nigeria, on July 13, 2020, released Guidelines on Global Standing Instruction.
GSI is a mandate or an instruction to be executed by a borrower, authorising financial institutions to recover a debt from any or all accounts maintained by that borrower across various participating financial institutions through a direct set-off from deposits/investments held in those financial institutions.
The situation in the emerging money-lending fintech sector has become so worrisome that it has drawn the ire of Nigeria’s lawmakers, the Federal Competition Consumer Protection Commission, Economic and Financial Crimes Commission, National Information Technology Development Agency, National Human Rights Commission and CBN.
Illegal fintech lenders in operation
The situation is worrisome, as unregistered money-lending fintechs have been discovered to be in operation. For a money-lending firm or financial company to legally operate in Nigeria, it must obtain licence from the CBN. However, findings reveal that several loan firms in the country violate the rules and regulations of the apex bank.
In fact, there are instances where customers, after repaying loans with its accompanying interest and other charges, still discover that damaging messages were been sent to their contacts’ phones.
The situation underscores the need to sanitise the money-lending fintech sector, as it has come to stay, and patrons cannot be left unprotected, and the sector unregulated. The 2022 outlook on the sector, recently published by the leadership of Fintech Association Nigeria lends credence to this fact.
As regards its membership growth and ecosystem development, the association stated, “We saw over 24 per cent growth in membership, with Facebook and Fairmoney joining the association as a strategic member. Some of our members like OPay and Flutterwave also gained Unicorn status in 2021.
“In terms of ecosystem representation, FintechNGR was part of various government and regulators’ committees set up by African African Continental Free Trade Area, Nigeria Communication Commission and NITDA. It played a major consultative role in the evolution and launch of eNaira by the CBN as well as help in the deepening of knowledge on Central Bank Digital Currency by various presentations and organisation of training for various organs of the government.”
Protecting customers
At this juncture, it is germane to say that the need for the protection of customers in the sector has caught the attention of lawmakers and Nigerians in other sectors of the economy.
An accountant, Peter Imasuen, said protecting customers from the somewhat booby trap of money-lending fintechs should begin at the stage of default and loan recovery, adding that there is need to adopt more decorous means of recovering loans.
He said, “Inasmuch as it is the obligation of customers to repay the monies loaned to them, money lenders should, on their own part, demonstrate the core values in the sector, particularly that of respect in all dealings with customers. There should be self-regulation in the emerging sector. Again, loan recovery solution should starts with an on-boarding process to remove friction from the customer experience.”
He explained that lenders should not erroneously assume that borrowers are aware of most information on borrowing, adding that though the market might be generally perceived as formulaic, providing adequate information is the lender’s duty to the borrower.
Every iota of information that has to do with attendant costs, fees and charges should expressly be shared on all communication disseminated to the customer, he noted, adding that the decision to transact business with a lender, or not, is the exclusive preserve of the borrower.
