FCCPC Moves to Tackle Escalating Loan Apps Borrowings Abuse
Loan Apps: The Federal Competition and Consumer Protection Commission (FCCPC) has announced plans to formulate a comprehensive regulatory framework to tackle the issue of Nigerians’ increasing indebtedness to digital money lenders (DMLs), commonly referred to as loan apps.
The Chief Executive Officer of the Commission, Mr Babatunde Irukera, highlighted the escalating concern of indebtedness to Digital Money Lenders (DMLs) as a substantial industry issue.
He acknowledged the Commission’s success in mitigating abuse and harassment by these loan apps. However, he underscored that despite these efforts, instances of default persist among Nigerians availing loans from these platforms.
Irukera said the implementation of its interim framework resulted in an 80% reduction in harassment and defamatory messages from loan apps. While they aim to address the remaining 20%, they are not fully satisfied with their achievements.
Highlighting that the decrease in harassment and defamation practices by loan apps has inadvertently resulted in a surge of defaults by borrowers, Irukera pointed out that the escalating debt poses a potential threat to the viability of digital lenders. He noted that DMLs who play crucial roles in the economy, are at risk of facing collapse due to the mounting debt crisis.
“One of the big issues that we’re seeing is that there’s now a significant level of loan default because people are not able to use these unethical and inappropriate loan recovery mechanisms, and I’m insistent that you cannot say to me that the only language Nigerians understand is to abuse them. No, I disagree.
“We must necessarily do the work no matter how hard it is to find a more sensible way to recover loans because I also agree that if these digital money lenders are unable to recover their loans and drop out of the market, it’s a consumer protection problem because of those who need those types of short-term unsecured lending.
“So, we have to find the balance, and so some of the regulations that will come out in 2024 will be a broader approach to responsible borrowing and responsible lending by individuals and corporations. I’m hopeful that the future of what we’re building is that even school landlords would be able to report to a centralized credit system about the conduct of tenants, students, and parents so that we can know each person’s level of fiscal responsibility or credit wordiness.” Irukera said.
The FCCPC boss stated that a systemic approach to credit accessibility is needed to prevent defaults. It was found that most defaulters take loans from multiple apps. He added that the limited and interim regulatory framework for the loan apps is still evolving because fintech is new and emerging across the world.
According to him, digital money lending is fulfilling an important role in society. Therefore, creating the best regulatory environment for it requires studying the industry and understanding how it operates.
Irukera said the FCCPC has registered more than 200 loan apps under the interim regulatory framework. He added that the commission is working to clean up the digital lending market and put an end to unethical practices such as defaming and harassing borrowers, noting that a total of 211 digital lenders have been approved by the commission. #FCCPC Moves to Tackle Escalating Loan App Borrowing Abuse