A customer of an online money lender had taken to social media to accuse the lending app of pronouncing him dead and crafting and circulating his obituary to family and friends.
Shortly after, another client revealed via a Facebook group how she had been similarly treated by a loan app for defaulting on her repayment plan of the N15,000 she had borrowed.
The cases cited above are just two of thousands of similar scenarios involving online money lenders and their customers.
Perhaps the most popular tactic employed by these lenders, commonly referred to as loan sharks, to force loan repayments is to send warning text messages to the mobile contacts of their defaulters describing them as people of questionable character.
They also call contacts of defaulters who ignore their loan transactions with friends, relations or colleagues in an attempt to name and humiliate them or seek information about their whereabouts.
Concerned about the abusive and twisted practice that is prevalent, the Federal Competition and Consumer Protection Commission (FCCCPC), in November 2021, led a collaborative effort to remedy the situation.
Babatunde Irukera, Executive Vice President/General Manager of the FCCPC, said the commission was working closely with the Independent Corrupt Practices Commission (ICPC), the National Information Technology Development Agency and the Bank. central Nigeria.
“Continued complaints of questionable repayment enforcement practices, including public shaming and invasions of privacy, arbitrary, unfair, unreasonable, or abusive interest rates and/or calculations of loan balances, harassment and failure of consumer feedback mechanisms, among others, have led to meaningful and understandable consumers. aggravation and discontent,” he said.
In May, Irukera confirmed that the FCCPC had cracked down on lending apps and other companies violating the rights of Nigerian consumers by freezing 50 accounts belonging to illegal lending app operators.
“We have so far frozen 50 accounts. We have removed 12 apps from the Google Play Store and are currently in discussions with over 10 companies.
“The rate of defamatory messages has dropped by at least 60%. I’m not saying they’ve stopped, but they’ve dropped by at least 60%.
“More than half of the companies currently before us have agreed that they will have to change their behavior, including firing some employees who sent defamatory messages.
“We are developing a regulatory framework that will involve other regulators, and we are currently suing at least one company,” he said.
Three months later, the FCCPC ordered payment system operators, telecommunications companies and mobile network operators (MNOs) to stop providing services that enable the operations of illegal online lenders.
He also said that a limited interim regulatory/registration framework and guidelines for digital lending have been developed and adopted by the Joint Interagency Regulatory and Enforcement Working Group to establish a framework. clear regulations for the sector.
But how did the activities of financial sharks become so popular that they blatantly violate consumer privacy, fair lending terms, and ethical loan collection practices?
Experts have identified economic downturn, desperation, ease of borrowing, and customer greed as some of the main reasons for the proliferation of loan apps.
Michael Familokun, a financial expert, said loan apps were unpopular before the Nigerian economy went into recession in 2016.
“Before 2016, loan apps were in use, but defaults and unethical repayment practices were very rare.
“Gradually, the money sharks started to exploit the difficulties faced by the masses by offering them tempting quick loan options without collateral.
“The situation has gone from bad to worse with the COVID-19 outbreak, when many people’s livelihoods have been hit hard, especially during the lockdown,” he said.
Familokun added that since many people no longer had disposable income, they had to rely on quick loans to deal with emergencies.
“Be careful, emergencies do not inform you that they are going to strike; that is why they are called emergencies.
“So, with no disposable income and in a terrible economy, when a loved one gets sick or there are other demands, what do they do?
“They can’t resist the temptation to open their phone and download an app that promises an instant loan,” he said.
Mike Anyanacho, an ICT expert based in Lagos, said the ease of getting a loan without leaving the comfort zone has increased the number of people being victimized by loan sharks.
“If you want a bank loan, the conditions attached could discourage you. But with online applications, you only need to upload your BVN, credit card number, passport photo, and other personal information.
“They don’t require a salary account or collateral. They don’t even require things like your address and your guarantors.
Anyanacho also said that these loan apps feed on the greed of their victims.
“Some customers simply take out the loan because they were promised an upgrade when settling the previous credit facility.
“I know a lot of people who take quick loans from one loan app to pay off another to get upgraded,” he said.
While commending the FCCPC for its crackdown on illegal loan applications that violate consumer rights, he urged the commission to sensitize Nigerians on responsible ways to access loans.
Indeed, those who take out loans from illegal loan apps cannot be completely exonerated from their guilt. However, some experts say these money sharks are the real bad guys for breaking the laws.
Many illegal loan apps have hidden terms and conditions unknown to their customers until they start the repayment process.
For example, some financial sharks hosted on Google Play Store advertise 60-90 day repayment plans, only for customers to find out when getting a loan that they have 15-30 days to pay off. .
Meanwhile, a play store policy check on the personal loan app indicates that:
“We don’t allow apps that promote personal loans that require full repayment within 60 days or less from the date the loan was issued (short-term personal loans).
“This policy applies to apps that directly offer loans, lead generators, and apps that connect consumers with third-party lenders.”
There have also been reported cases of illegal loan apps defrauding victims by accessing their BVNs, ATM card numbers, and other personal information.
Despite the commendable efforts of the FCCPC, illegal loan applications persist in both their operations and their dehumanizing loan collection practices.
This requires greater collaboration between the commission and other relevant stakeholders to stem the tide of tyranny from many online money lenders.