The Federal Competition and Consumer Protection Commission (FCCPC) has said it would be developing a new regulatory framework to address Nigerians’ rising indebtedness to digital money lenders (DMLs), known as loan apps.
The Chief Executive Officer of the Commission, Mr. Babatunde Irukera, disclosed this on Monday while featuring on a TVC live program. Irukera noted that indebtedness to the DMLs has become a big industry issue.
According to him, while the Commission has succeeded in reducing abuse and harassment by the loan apps, Nigerians taking loans from the platforms have continued to default.
Irukera said the rising debt could lead to the collapse of the digital lenders that are also playing critical roles in the economy.
While noting that the reduction in the use of harassment and defamation of lenders by the loan apps has led to an increase in defaulting by the borrowers, Irukera said:
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“One of the big issues that we’re seeing is that there’s now a significant level of loan default because people are not able to use these unethical and inappropriate loan recovery mechanisms and I’m insistent that you cannot say to me that the only language Nigerians understand is to abuse them. No, I disagree.
“We must necessarily do the work no matter how hard it is to find a more sensible way to recover loans because I also agree that if these digital money lenders are unable to recover their loans and drop out of the market, it’s a consumer protection problem because of those who need those types of short-term unsecured lending.
“So, we have to find the balance and so some of the regulations that will come out in 2024 will be a broader approach to responsible borrowing and responsible lending by individuals and corporations. I’m hopeful that the future of what we’re building is that even school landlords would be able to report to a centralized credit system about the conduct of tenants, students, and parents so that we can know each person’s level of fiscal responsibility or credit wordiness.”
The FCCPC boss added that once there is a systemic approach that prevents people from access to credit on account of their responsibility or otherwise, there would be self-regulation of people and then loan recovery. He said the Commission had found out that most people defaulting are the same taking loans from several other apps.
“So, we can address that if there is a central place where they could get information about individuals and their creditworthiness. If you don’t have access to credit you must build your responsibility and your creditworthiness and so there’s quite a lot still in the pipeline that we’ve been working on and we anticipate that 2024 will cause that to emerge,” he added.
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Irukera noted that the implementation of its interim framework has led to about 80% reduction in harassment and defamatory messages from loan apps.
While noting that the Commission was not satisfied with its achievements, he said efforts are ongoing to address the remaining 20%.
He added that the limited and interim regulatory framework for the loan apps is still evolving because fintech is new and emerging across the world.
According to him, digital money lending is plugging an important gap in society, hence, developing the best regulatory ecosystem for that also requires learning from the industry and learning from how it is operating.
Under the interim regulatory framework, the FCCPC has registered over 200 loan apps as it seeks to sanitize the digital lending market to end unethical practices of defaming and harassing borrowers.
As of the last count, a total of 211 digital lenders have been approved by the Commission.