Digital lenders have protested the push to give the CBK unilateral powers to revoke their licences for breaching the confidentiality of borrowers who default on their loans. FILE PHOTO | NMG
Digital lenders have protested the push to give the Central Bank Kenya (CBK) unilateral powers to revoke their licences for breaching the confidentiality of borrowers who default on their loans.
Industry lobby Digital Lenders Association of Kenya (DLAK) says allowing CBK to single-handedly strip firms of their licences will be punitive and will lead to an uncertain regulatory landscape.
The lobby wants the provision to grant CBK overriding powers to revoke licences removed from the regulations in a push that looks set to stir the banking regulator.
The Digital Credit Providers Regulations, 2021 have given CBK powers to revoke licences of firms which send information of loan defaulters to third parties in name-and-shame tactics meant to recover the money.
“We suggest that the criteria for revoking or suspending licence should be different as revoking a licence is the most serious consequence for a digital provider,” DLAK says in its comments on the proposed regulations.
Sharing of information on loan defaulters remains one of the biggest concerns among borrowers and the financial sector regulator has in the past called on MPs to enact laws in a bid to tame rogue digital lenders.
“We are of the view that no action should be taken by the CBK until a final decision has been issued by the data commissioner as digital credit providers will have to follow a separate process in relation to any data protection concerns,” DLAK added in its submission.The alternative credit providers have also threatened to report defaulters to their employers in a bid to compel them to settle their obligations.
CBK published the regulations last month and invited the public and other industry players to give their views ahead of gazetting the laws in March.
DLAK says that in instances where digital firms breach confidentiality of borrowers’ information, the CBK should wait for a final decision from the Office of Data Protection.
Digital firms have in recent years flooded the local market, attracted by demand for quick credit that does not require collateral. Borrowers get loans within minutes via their mobile phones, making digital loans a quick fix for daily bills.
Besides social pressure, digital lenders rely on data analytics and loan repayment history among other tools to manage credit risk.
The regulations are part of the Central Bank Bill, 2021 that will see Kenya start regulating digitals lenders this year in a bid to protect borrowers against predatory lending.
jmutua@ke.nationmedia.com
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