CAK should use its powers to tame rogue digital lenders

The Central Bank of Kenya (CBK) has raised genuine concerns about the danger of a spike in borrowing from unregulated mobile lenders over the Christmas period. If quick action isn’t taken, many Kenyans will find themselves with debt problems come January.

The Covid-19 pandemic has robbed many Kenyans of their jobs and spending power, and the pressure to spend during the festive season and when schools reopen fully in January is likely to send many into the hands of predatory lenders.

Some of the lenders charge up to 520 percent in annualised interest, but have still managed to lure many borrowers into a debt trap that comes with negative listing on credit reference bureaus. The CBK says it has a remedy already available to protect consumers, even as they wait for MPs to pass the Bill that gives it powers to regulate the activities of these mobile lenders.

Earlier this year, the Competition Authority of Kenya (CAK) announced that it was investigating the exorbitant monthly interest rates charged by digital mobile lenders. Complaints lodged with the CAK include reports that digital lenders do not provide full product information to borrowers and claims of consumer protection breaches.

These are basically the same issues raised by the sponsors of the Bill in Parliament.

The CAK has powers to protect consumers from predatory digital lenders, even as they wait for these lenders to come under the regulatory umbrella of the CBK.

The law, for instance, empowers the competition watchdog to reverse borrowing terms that are based on misleading representations on loans issued to customers.

This is because without the proposed changes in the law that place similar pricing restrictions on mobile lenders as those put on banks, the CBK is likely to have only a limited arsenal with which to fight the problem of predatory lending by the mobile lenders.

At the same time MPs should appreciate the heavy burden that some of these mobile loans have placed on borrowers, and pass the regulations at the earliest possible opportunity.