An online lending company, Soko Loans have been fined N10 million by the National Information Technology Development Agency (NITDA) for various infractions against its users including invasion of privacy and the “erosion of trust in the digital economy.”
This followed a series of complaints levelled against the loan app for unauthorized disclosures, failure to protect customers’ personal data and defamation of character.
According to NITDA spokesperson, Hadiza Umar, the company also didn’t carry out due diligence as prescribed by the Nigeria Data Protection Regulation (NDPR).
She said the agency, as part of its due diligence process, commenced investigations after one such complaint was filed in November by Bloomgate Solicitors on behalf of its client.
Umar said investigations revealed that Soko Lending Company grants customers loans without collaterals. It however requires them to download its mobile apps which enables the lending company to gain access to their phone contacts.
The app also activates a direct debit feature so the company could transfer directly from the loanee’s account on the agreed repayment day. But when the loanee failed to meet up with repayment due to insufficient balance, the company started sending privacy-invading messages to the contacts.
“According to one of the complainants, when he failed to meet up with his repayment obligations due to insufficient credit in his account on the date the direct debit was to take effect, the company unilaterally sent privacy invading messages to the complainant’s contacts.”
The NITDA spokesperson said investigations revealed that the contacts to whom the messages were sent didn’t know about the loan as they were not parties to the transactions and neither did they consent to the processing of their data.
She also accused Soko Loans of embedding trackers which share customers’ data with third parties in its mobile app. These trackers were installed without the notice or approval of users and without going through the appropriate legal channels.
In light of its findings, the NITDA has slammed a N10 million fine on Soko Loans for compromising the privacy of Nigerians and for the erosion of trust in the digital economy.
Not the only ones
But Soko Loans aren’t the only online lending company indulging in this practice. Virtually every loan app and microlending company have this as one of its core strategies for ensuring repayment. This is because one of their major selling points is collateral-less loans.
In the absence of collaterals, they had to devise other means of getting back their money. Gaining access to contacts lists and sending messages which many customers have described as ‘defaming’, though unconventional, has become a generally accepted strategy for them.
It is not yet clear if the contract between the loanee and the loan apps contains an agreement to this invasion of privacy by the loanee. But most recipients of the distasteful messages certainly didn’t sign up for it.
However, with their major strategy under attack by the NITDA, it remains to be seen if this would spur a change of strategy by loan apps to more conventional and less invasive means of getting their money back.