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Editorials

EDITORIAL: Tighten digital loan rules to protect consumer rights

Central Bank of Kenya
Central Bank of Kenya. FILE PHOTO | NMG 

That digital lenders are opposed to plans to control charges and fees on customer loans is rather disconcerting given the realities and widespread outcry in the market.

The Central Bank of Kenya (Amendment) Bill, 2020, seeks to empower the banking regulator to supervise digital lenders for the first time, in a bid to curb the steep digital lending rates that have plunged many borrowers into a debt trap as well as predatory lending.

The Digital Lenders Association (DLAK) has, however, claimed that imposing caps on their loan charges and fees would hurt the flow of credit to micro-sized businesses and instead favour a risk-based loan pricing model because customers have varied profiles and needs.

We take an exception with this argument by DLAK because some of the digital lenders have been acting in total disregard of consumer rights. It is only fair that some order is instilled in the day-to-day operations of this fast rising segment of the lending business.

It is a fact that many of these mobile lending platforms are privately owned (some by foreigners) and are not subject to any form of public disclosure laws. This has exposed consumers to exploitation as evidenced by the widespread public outcry over expensive lending rates and brazen intrusion of privacy and personal information.

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Although digital credit has been hailed for helping small businesses manage their daily cash flow and households to cope with emergencies, it is only proper that digital lenders are put on a leash and the charges on loans monitored to protect the consumer.

A majority of the digital credit consumers are unsophisticated and have no access to critical information such as prevailing fair lending terms hence they need protection from the predatory behaviour of some of the digital lenders.

Just like commercial banks, the digital lenders should be placed under a formal regulatory regime and made to comply with all consumer laws.

This should extend beyond just the lending rates to the area of personal information which is currently badly abused by some of the digital lenders.

Consumers have rights to be informed of how their personal information will be used.

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