Facebook to limit traders on credit bureaus blacklistMonday October 31 2022
Facebook parent Meta Platforms Inc will from January start relying on credit reference bureaus (CRB) to build profiles of traders’ advertising on its platforms in efforts to curb mounting defaults.
The tighter credit measures announced as part of the company’s updated terms to be effective from January 3, 2023, will also see some advertisers being required to make upfront payments for Facebook and Instagram advertisements.
Meta, which owns Facebook, WhatsApp and Instagram, is racing to protect its bottom line from non-performing accounts, amid demand by the government that companies doing business online pay the digital service tax, which is equivalent to 1.5 percent of the gross transaction value.
Read: Facebook to share traders statistics with KRA, police
The CRB checks will help Meta to monitor an advertiser’s creditworthiness ahead of labelling them as invoiced or non-invoiced.
Facebook recovers money from the advertisers after 30 days and a significant number of traders have failed to pay within the window after running promotions on the platforms.
“By placing an order, you authorise us to obtain your personal and/or business credit report from a credit bureau, either when you place an order or at any time thereafter,” says Meta in the updated terms of service.
“Non-invoiced clients are those who must make payments at the time of purchase itself. In its sole discretion, Meta may classify clients as invoiced clients based on factors such as ad spend and creditworthiness.”
The move by Meta to consult CRB reports will coincide with far-reaching reforms that have been mooted by the government on the credit information sharing system.
Last month, President William Ruto said the aim is to shift away from negative listings of defaulters to a new system of credit score rating that does not deny borrowers credit on the strength of their CRB scores.
The move, the President said, will free more than four million Kenyans from negative listings, in particular small businesses that are yet to recover from Covid-19 economic hardships.
Meta says in its new terms that it will start levying interest at one percent per month on overdue payments from its advertisers, indicating that it will clamp down hard on advertisers who enjoy the services of its platforms and then refuse to pay up.
“If your payment method fails or your account is past due, we may take additional steps to collect past due amounts. You will pay all expenses associated with such collection, including reasonable legal fees. Past due amounts will accrue interest at one percent per month or the lawful maximum, whichever is less,” says Meta.
The technology firm will also be sharing information with tax and investigative authorities from January, as part of its compliance with the digital taxes law.
Businesses advertising on the platform will therefore automatically offer their consent for sharing of dealings with a governmental entity or body if it believes that disclosure would assist in a lawful investigation.
The dealings include the advertising contents and all information associated with the publicity placed on its platform.
This will be a major boost to the Kenya Revenue Authority (KRA), which has in the recent past increased its surveillance on Kenyans displaying lavish lifestyles on social media but paying little or no taxes.
The digital service tax came into effect at the start of January 2021. It is levied on the sale of e-books, movies, music, games and other digital content. It also applies to foreign companies. The taxman expects to collect Sh13.9 billion from the digital tax over the next three years.
In Kenya, there are over 12 million Facebook users, about two million Instagram users and 22.2 million daily WhatsApp users in 2022, according to analytics firm Statista.
Due to the explosion of e-commerce, platforms such as Facebook, Twitter and Instagram have become key market places for businesses, which advertise and also close deals on them in a departure from the traditional brick and mortar business outlet system.
Many small businesses that would otherwise struggle to afford listing their goods and services on traditional media advertising outlets are also making use of these platforms to gain new customers.
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