New Telegraph

Online banks: Loan Sharks’ unusual offer, strange retrieval methods

Getting a quick loan from the several online loan companies in Nigeria, also known as loan apps is unusually easy, without any form of collateral or too much documentation. All that is needed is for the applicant to download the loan app on his or her android phone device, fill the form and supply the BVN. Also, mode of identification, and a passport photograph are required. Finally, you will allow the lender to have access to all your personal contacts in your phone. However, PAUL OGBUOKIRI reports on some strange means applied by the lenders when debtor defaults

Shaming defaulter a way to get out money—Loan apps

Inside online money-lending business

in Nigeria Nigeria’s digital e-commerce platforms and Fintech companies have delved into provisions of short-term loans to help subscribers meet urgent needs. But they have in recent months resorted to unprofessional measures of harassment, cyberbullying and breach of data privacy of their customers, who may have defaulted in loans repayment. Since they do not require collateral and proper documentation as is the case in traditional banks, accessing loans with just a click makes them a preferred choice. Millions of Nigerians, who lack bank accounts or security to borrow turn to these lenders for loans, starting from as low as N2, 000. In turn, they experience character assassination, cyberbullying, physical abuse, public shaming, and extortion among others from these digital bank practitioners. Many have taken to social media to complain about harassment when they default and their contact details being shared with third parties without their approval. The loan apps operators apply very aggressive recovery methods; even as they charge interest as high as 45 per cent per annum.

Social shaming scheme

The online loan companies make use of the social networks of their customers to shame them, based on default. Sunday Telegraph learnt that defaulting customers are sent messages such as, “You will not be able to get a loan from us or any other loan company/bank again,” or “your loan will be increasing every day by 5 per cent.” Sometimes, they use threatening messages like, “We are giving you till 4 pm to make your payment today or else.” Udoma Nseobong, a staffer of Dangote Fertiliser, Lekki, Lagos had taken a N30, 000 loan from CashLion Credit and he paid the weekly interest consistently for six weeks. When it was time to pay the capital, he defaulted by a day and cleared his debt the next day but the messages were sent to his family members nonetheless. “I had some challenges that made me default for a day. The second day, even after I’d paid off with charges; I was declared a fraudster on the run with my entire family,” he lamented. A user of NairaPlus, who identified herself as Ifeyinwa Obiu, claimed in the Google Play comments section of NairaPlus that she had been repeatedly contacted about an unpaid loan by representatives, who used abusive and threatening language and increased her interest rates. “However, the loan recovery procedure/ tactics this organisation employs is so unprofessional and appalling. Threat isn’t the way – be professional,” she added. An anonymous University of Abuja student also said the texts cost him his relationship, and another user said his boss almost fired him for embarrassing the company. There were countless complaints on the loan apps page on Google Play Store indicating deep grief those messages had caused. In a similar development, in May last year, Musa Abdullahi needed N50, 000 for an important task. So, when he saw 9Credit, an online platform, offering short-term loans, he grabbed the offer. The 31-year-old Abuja-based Estate Broker was elated when the approval of his loan request arrived shortly after filling, on the app, the Know Your Customer (KYC) form with necessary details such as his Bank Verification Number (BVN). Little did Abdullahi know that it was the beginning of a relationship that would turn sour. After repaying the initial N50, 000 with an additional 20 per cent, being the interest for seven days, he turned to 9credit for another loan. He repeated the cycle until the eleventh time when he defaulted. “When I defaulted, that was sometimes at the end of August, I began to receive multiple text messages from different sources, saying they are Recovery Agents from 9Credit. The agents kept sending threatening messages to all my contact lists, including my wife, colleagues, mother-in-law and uncles,” Abdullahi said. “The harassment went further with several threats and curses. Also, using all manners of offensive adjectives like “chronic and unremorseful debtor” some of the text messages stated that I had been declared ‘wanted.” Abdullahi said that despite the insults and embarrassment to him and members of his family, he was not bitter because he understood that he had breached an agreement by not paying up when due. Though the criticism of these practices has steadily grown, Titilayo Adetonya, a customer representative for CashLion, who spoke to Sunday Telegraph, justified the methods of debt collection by online loan companies. “There is no defamation of character involved when we trust people we’ve never seen by giving them money and when it’s time to pay, they don’t pay? “It’s lawful to send those messages to their contacts because we warn them before we send those messages to their contacts and that’s how we get our money,” she said.

Google intervenes

Google said effective from May 31, 2023, it will be updating its personal loans policy to state that apps aiming to provide or facilitate personal loans may not access user contacts or photos. “We are introducing additional requirements for personal loan apps targeting users in Pakistan. Personal loan apps in Pakistan must submit country-specific licensing documentation to prove their ability to provide or facilitate personal loans.” This new policy is coming after the firm announced updates to its Developer Programme Policy, mandating digital money lenders in Nigeria, India, Indonesia, the Philippines, and Kenya to conform to regulatory rules or be taken down by January 31. According to the firm, only digital money lenders that have adhered to and completed the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, 2022 (as may be amended from time to time) by the Federal Competition and Consumer Protection Commission (FCCPC) and obtain a verifiable approval letter from the FCCPC will be allowed on Play Store in Nigeria. Commenting on the new policy, the Chief Executive Officer of the FCCPC, Babatunde Irukera, stated that it was a welcome development and showed that Google was institutionalising its regulatory policy. He said: “It is a welcome development effort and is consistent with the position the FCCPC has taken and what we are enforcing. “Google is now institutionalising our regulatory effort as a policy, which is very welcome. It is certainly important for proper regulatory oversight of the industry, and we commend Google for taking a position that is consistent with our position as regulators.” He added: “Recall that we took this position earlier and what has happened is that Google has looked at the regulatory landscape, looked at the regulatory priorities, and is supporting those priorities by institutionalizing those regulatory priorities and positions.” The FCCPC recently stated that it has approved 173 digital lending applications to operate in the country. 119 of these got full approvals while 54 got conditional approvals. This move became necessary after loan apps started harassing Nigerians by sending defaming messages to their contacts, and more. The commission’s ‘Limited Interim Regulatory/ Registration Framework and Guidelines for Digital Lending 2022’ is an attempt to regulate the digital lending space and make registration and approval a prerequisite for companies seeking to operate in the space.

FCCPC clamps down

According to the FCCPC boss, Babatunde Irukera, the commission was working closely with the Independent Corrupt Practices Commission (ICPC), the National Information Technology Development Agency (NITDA) and the Central Bank of Nigeria (CBN) to end the menace. Speaking recently on Arise TV on how the recent registration drive of the commission will protect the privacy of Nigerians, Irukera said: “We also want to restrain what kind of information they are able to pull off people’s phones and what they are able to do with that information, especially with respect to making contact with people on the contact list, and their loan recovery practices; the kind of language, the times they call, what kind of things they say.” “We have so far frozen 50 accounts. We have taken over 12 applications off the Google Play Store and we are in discussions with more than 10 companies right now. The rate of defamatory messages has dropped by at least, 60 per cent. I am not saying they have stopped but they have dropped by at least, 60 per cent. More than half of the companies that are currently before us have agreed that they will have to modify their behaviour, including sacking some employees, who sent defamatory messages. We are developing a regulatory framework that will involve other regulators, and we are prosecuting at least, one company right now,” he said.

Experts’ views

Financial experts said before 2016, there were loan apps in operation but cases of default and unethical repayment practices were very uncommon. However, according to them, gradually, money sharks started to exploit the hardship faced by the masses by dangling mouth-watering quick loan options without collateral. According to an IT expert, Andrew Emmanuel, the government should make a policy that enables easy loan collection from banks to the general public who do not have a salary account. ‘‘They should regulate the creation and operation of Fintech startups to ensure human rights and privacy protection to their clients. The government should apprehend and prosecute any Fintech company, which does not comply with the rules and regulations provided by the government and/or engage in any crude means of recovery, hence causing their clients physical or psychological damage,’’ he said. Another IT expert based in Lagos, John Ugochukwu, said the ease of securing a loan without leaving one’s comfort zone has added to people falling victim to loan sharks.

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