Digital lenders under fire over shaming loan defaulters

NAIROBI, KENYA: Digital lenders association has put two loan app operators on notice over uncomfortable ways of reaching out to borrowers to pay back credit.

This came out following online protests over how the operators namely Opesa and Okash deploy unpopular ways to get back their money from defaulters.

The association on Monday said it has taken note with great concern the continued reports about Opesa and Okash’s poor shaming practices of debt collection whereby they reach out to contacts on the customer’s phone book to try and get them to pay back a loan.

“We condemn this illegal and morally questionable behavior and urges Okash and Opesa to cease such practices,” said DLAK Chairman Robert Masinde on behalf of all members.

“Not only does this behaviour go against Kenyan data protection laws, but it reeks of indignity. By reaching out to a customer’s contact list, Opesa and Okash rob the individual of basic dignity and consumer rights. This can have long term effects on their psychological well-being and damage relations that may have taken years to build,” he said.

The association members who condemned the bad behavior include Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, LPesa, Kopacent, Four Kings Investment T/A Sotiwa, Mobile Financial Solutions (MFS), Kuwazo Capital, Finance Plan Ltd, Branch, VAELL Leasing, Roamtech solutions, Aspira, Mobfin, Fiberry, and Pesa zone.

Central Bank Bank of Kenya has been on a warpath with digital lenders over their mode of operations. Early last month, Central Bank of Governor Patrick Njoroge insisted that the lenders must be regulated to bring order in the industry.

Some critics have argued that Njoroge’s hard-stance against the digital credit providers is anti-innovation, claiming that innovation always comes before regulation. However, Njoroge has been adamant that the continued existence of digital lenders poses a major risk to the country’s financial system.

“You cannot open a kiosk anywhere without a licence,” said Njoroge, noting all over the world, finance and health are the highly regulated sectors.

Recently CBK which is the industry regulator withdrew approvals granted to the lenders to credit reference bureaus (CRBs) as third-party credit information providers, in effect leaving them as digital shylocks with little means of determining the credit-worthiness of borrowers.

“The withdrawal is in response to numerous public complaints about misuse of the CIS (Credit Information Sharing) by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints,” said CBK, noting that they will no longer submit credit information on their borrowers to CRBs.

The firms, under the aegis of the Digital Lenders Kenya Association, have in the past expressed their willingness to be regulated.