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Online Loan: How not to treat customers

by Goddy Ofose
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Online lenders, also known as ‘loan sharks’ became prominent in the country due to tough loan conditions imposed by commercial banks, though their unconventional loan recovery tactics deployed against defaulters have brought untold pains and emotional trauma to many Nigerians.

Undoubtedly, online lenders unwittingly wormed their ways into the nation’s banking space when tough economic conditions made many to resort to borrowing from online soft loan lenders.

More importantly tough loan conditions imposed by commercial banks have helped the online banks to grow in leaps and bounds.

Interestingly, the use of technology and their ability to advance loans to prospective customers without collecting any collateral also make the online banks delightful to many Nigerians. Also, thousands of Nigerians who need financial reprieve find some of the online lenders very attractive because of their ability to give soft loans within a short period of time.

Contrary to the much expected succour, scores of unprofessional online lenders have, in recent years, deployed very crooked and illegal means to recover loans from those they describe as recalcitrant debtors. Sometimes, they employ crude and illegal means to embarrass clients who fail to repay their loans few days after due date.

These illegal and unconventional methods of reclaiming loans have often come with huge collateral damage to the integrity and character of the borrowers. Some affected individuals are even said to have developed emotional problems after such untoward encounters. Many desperate borrowers have had their public image tarnished after borrowing ridiculously low amounts of money from online lenders. They hardly envisaged the sordid aftermath of their decision to patronise the unprofessional online lenders.

Moremi Onifade, not real name, had to commit suicide when she could no longer put up with the barrage of harassments, insults, and dragging her phone contacts to a loan deal she struck with one of the online loan providers.

Being someone who loves to keep a lot to herself, in fact one of her friends said Moremi probably took the loan out of not wanting her relatives and associates to know she was too broke to provide for some basic personal needs.

Imagine the loaner now taking the issue she would have loved to remain secret to the same people she had kept her issue away from. The breach of her privacy was way too deep a psychological blow for her to cope with, a development that forced her to end it all.

The Central Bank of Nigeria (CBN) had in 2010 repealed the universal banking model and ordered banks to divest from non-banking businesses.

The CBN discovered that banks were investing a substantial part of depositors’ funds in more profitable businesses at the expense of their primary mandate of lending to the public.

The CBN also in 2018 introduced a stringent loan-to-deposit-ratio policy to force banks to channel certain percentage of their deposits to lending to the public.

This is aimed at making adequate amount of credit accessible to householders and other small and medium-scale enterprises.

A report by Access to Financial Services in a 2020 Survey, Nigeria has a higher rate of financial exclusion than many other countries in Sub-Saharan Africa. The report states that just above half of adults – 50.5 per cent of adults, or 53.6 million adults in 2020 – now use formal financial services up from 48.4 million in 2019.

The report added that “However, at the current rate of progress, the National Financial Inclusion Strategy targets for 2020 will not be met until around 2030.”

As part of the commitment to deepening financial inclusion in Nigeria and sustain inclusive economic growth, the CBN Governor who doubles as the Chairman, National Financial Inclusion Steering Committee, Mr Godwin Emefiele, in its five-year strategy, 2019-2024, seeks to achieve a target of 95 per cent financial inclusion rate by 2024.

The new target, according to Emefiele, calls for institutions to re-strategise and refocus initiatives, policies and schemes that will accelerate the pace of delivery of their respective financial inclusion efforts.

A financial expert said since the online lenders were shrouded in secrecy, the government needed to rescue the situation of deploying harassment in reclaiming unpaid loans, “There is no free money. Government must rise quickly. The CBN should work with the CAC and the Nigeria Police Force. If anybody wants to float an online company, they should request for certification.”

Concerned individuals have urged government to intervene in sanitising the activities of the loan sharks, “The banks opening accounts for them should cooperate with the CAC in this regard in opening accounts for them.”

Loan sharks have, in an attempt to get their money back, gone crafty with illegality, something unfounded on consumer credit market.

Calling it “ugly side of consumer credit”, financial experts believe the online lenders should define their business modules and how to recover their monies, while urging CBN and stakeholders to work together to eliminate the ugly practice.

Executive Vice Chairman/Chief Executive Officer, Federal Competition and Consumer Protection Commission, FCCPC, Babatunde Irukera, first hinted that the regulators in the financial system are collaborating to address a dominant and abusive practice by online loan lenders targeting some of the most vulnerable in the society.

Irukera recognized products and providers that bridge the lending gap to consumers who would otherwise be ineligible for conventional loans from traditional financial institutions, as well as the scalability and ease of access to financing for many people, but noted that such must occur within legally acceptable parameters of transparency and fairness.

He said in November last year the FCCPC hosted a meeting attended by the chief executive officer of the Independent Corrupt Practices Commission, and representatives of the National Information Technology Development Agency and the CBN towards addressing multiple potentially dubious conducts of certain loan sharks.

According to him there were continuing complaints about questionable repayment enforcement practices including public shaming and violations of privacy, arbitrary, unjust, unreasonable, or exploitative interest rates and or loan balances calculations, harassment, and failure of consumer feedback mechanisms among others have led to significant and understandable consumer aggravation and dissatisfaction.

He said the meeting resolved to collaborate, pursue urgent enforcement action against already known violators while investigating others. He also said that criminal prosecutions would be considered where applicable, and that a joint taskforce of analysts and enforcers was created and immediately activated.

From that moment it was obvious that the days of loan sharks playing gods in the life of Nigerians might have been numbered.

A House of Representatives member from Oyo State, Akin Alabi, also moved a motion to address the menace of loan sharks that was adopted by the House in its readiness to clamp down on the unscrupulous online lenders.

Experts agreed that most of the online lenders have no licence and are operating illegally, as they expressed that the constant harassment of clients would discourage genuine borrowers from seeking loans.

The experts also said that reporting borrowers to the contacts on their phones is nothing but a breach of privacy.

Mr. Monday Michaels Ashibogwu, Executive Member, Association of Communication Scholars and Professionals of Nigeria (ACSPN), in a comment at an event organized to mark World Consumer Rights Day, said “Consumers need to be protected but the consumers also need to be responsible. It is irresponsible for a consumer to be a chronic debtor.

“Some even stopped using their bank accounts just to skip repaying the loan taken from fintech platforms online. The consumers need to be responsible by paying back on time.”

The online loan lenders were originally licensed by the CBN to offer low-rate loans to Nigerians to break the bottleneck procedures and strenuous requirements by the mainstream commercial banks. However, the ‘loan sharks’ have overtly thrown cautions and professional ethics into the winds in their daily drive to recover loans that are not redeemed on time.

Like in the case of Moremi and many others, loan sharks devise underhand tactics by inflicting further pains on cash-strapped Nigerian borrowers.

Presently, there are numerous unregulated loan apps on the Goggle Play Store feasting on unsuspecting Nigerians, though a number of the loan sharks are registered with the Corporate Affairs Commission but with fake addresses but they often do these to entice unsuspecting borrowers.

A borrower, who pleaded anonymity, said he took N14,000 to repay N21,175 with N7,175 interest from an online lender.

According to him while most of the lending apps advertise between 60 and 180 days loan tenors they often give loans with repayment tenors of only seven and 14 days.

Unsuspecting borrowers, broke and in dire need of cash to solve some problems urgently, often fall for the false offers.

This perhaps was the reason the Federal Government began a probe of online banks over their alleged breaches of customers’ data privacy.

Director-General, National Information Technology Development Agency, NITDA, Kashifu Inuwa, once said the agency was working with the Nigeria Police Force and other relevant agencies to investigate several loan shark platforms, a disclosure made ahead of the National Privacy Week 2022.

Amidst outcry of data invasion by Nigerians against lending platforms, NITDA had imposed a fine of N10 million on Soko Loan for data breach last year August.

In November 2021, NITDA partnered with the FCCPC to address the increasing rates of data privacy abuse by money lending organisations, particularly fintech firms.

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