Editorials

Disclose loan fees to clients

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Summary

  • The competition watchdog says the disclosure will be implemented before June next year in the latest attempt to curb the steep digital lending rates.
  • What is needed is for the alternative lenders to disclose the fees to their customers as they are charged.

The Competition Authority of Kenya (CAK) says it will require the alternative lenders to disclose their full fees and penalties to the competition watchdog every four months as part of efforts to fix the problem of hidden charges.

The mobile lenders will disclose interest charges, late payment and rollover fees after investigations revealed 73 percent of borrowers do not know the cost of their loans.

The competition watchdog says the disclosure will be implemented before June next year in the latest attempt to curb the steep digital lending rates that have plunged many borrowers into a debt trap as well as predatory lending. This is going about consumer rights protection in a roundabout way.

What is needed is for the alternative lenders to disclose the fees to their customers as they are charged. This is what banks, for instance, have been doing when disbursing loans, including short-term credit advanced through mobile phones.

The regulator should simply make sure the alternative lenders also make similar disclosures to their clients. It does not make sense for aggregate fees charged to be disclosed to the CAK on a delayed basis.