The Federal Competition and Consumer Protection Commission has announced plans to establish a new regulatory framework aimed at addressing the growing dependence of Nigerians on digital money lenders, commonly known as loan apps.
The Chief Executive Officer of the Commission, Mr. Babatunde Irukera, disclosed this during a live program on TVC on Monday. Irukera emphasized that the issue of indebtedness to Digital Money Lenders (DMLs) has become a significant concern for the industry.
While the Commission has made strides in reducing abuse and harassment by lending apps, Irukera noted that borrowers from these platforms continue to default on their loans. According to him, the escalating debt could pose a threat to the survival of digital lenders, who play vital roles in the economy.
“One of the major issues we’re seeing is that there is now a significant level of loan default because people are unable to use these unethical and inappropriate loan recovery mechanisms, and you cannot tell me that the only language Nigerians understand is to abuse them. No, I don’t think so.
“We must do the work, no matter how difficult it is to find a more sensible way to recover loans because I agree that if these digital money lenders are unable to recover their loans and exit the market, it is a consumer protection issue because of those who need those types of short-term unsecured lending.”
He continued, “We must strike a balance, and some of the regulations that will be implemented in 2024 will take a broader approach to responsible borrowing and lending by individuals and corporations.
“I’m optimistic that in the future, even school landlords will be able to report to a centralized credit system about the behaviour of tenants, pupils, and parents so that we can determine each person’s level of fiscal responsibility or credit wordiness.”
The President of the FCCPC further explained that implementing a systemic strategy to prevent individuals from accessing credit irresponsibly would lead to self-regulation, eventually improving loan recovery rates. He highlighted the Commission’s findings that a significant portion of defaulters are individuals obtaining loans from multiple apps concurrently.
Irukera stated that the interim framework deployed by the Commission has resulted in an 80% reduction in harassment and defamatory messages from lending apps. While acknowledging progress, he expressed dissatisfaction and affirmed ongoing efforts to address the remaining 20%.
Emphasizing the dynamic nature of the fintech industry globally, Irukera highlighted the continuous evolution of the regulatory framework for loan apps. He noted that digital money lending serves a crucial societal role, necessitating the development of an optimal regulatory environment through learning from the industry’s operations.
As part of its initiative to curb unethical practices and harassment of borrowers, the FCCPC has registered over 200 loan apps under the interim regulatory framework. The Commission has approved a total of 211 digital lenders, signaling its commitment to cleaning up the digital lending sector.