Loan sharks: FG moves against rights violation and dubious activities by lending companies

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Is public shaming by lending platforms legal or criminal?- A legal perspectives

Nigeria’s federal government said it has begun investigations as part of its plans to penalise companies in the money lending industry that are engaging in illegal acts.

This is according to the information contained in a document signed by the Chief Executive Officer of the Federal Competition and Consumer Protection Commission (FCCPC), Mr Babatunde Irukera, on behalf of the Joint Regulatory and Enforcement Committee in Abuja.

In the statement, the FCCPC, the Central Bank of Nigeria (CBN), and the Economic Financial Crimes Commission (EFCC) announced that they had started an investigation into the money lending business for rights violations.

The committee also has the Independent Corrupt Practices Commission (ICPC) and the National Information Technology Development Agency (NTDA) as members.

Loan sharks: FG moves against rights violation and dubious activities by lending companies
A loan app

According to Mr Irukera, the committee would spearhead efforts to regulate a number of potentially questionable practices by certain money lenders, also known as loan sharks. 

‘’The Federal Competition and Consumer Protection Commission on November 10, 2021, hosted a meeting attended by the Chief Executive Officer of the Independent Corrupt Practices Commission (ICPC) and representatives of the National Information Technology Development Agency (NITDA) and the Central Bank of Nigeria (CBN); in leading an effort to address the multiple potentially dubious conduct of certain money lenders, otherwise known as loan sharks.

He also disclosed that the agencies decided to work together, take immediate enforcement action against known violators while investigating others, and pursue criminal prosecutions where appropriate.

Illegal activities by loan sharks

It is no longer news that many Nigerians have long complained bitterly about the illegal and heinous tactics employed by loan sharks. They include outright lies against defaulting consumers, invasion of their privacy and other rights violation.

Loan sharks have a history of exploiting their customers’ personal information, compromising their privacy and sharing it with those who were not engaged in the original agreement. 

Furthermore, these loan app operators send embarrassing short messaging service (SMS) and WhatsApp messages to the loan defaulters’ close contacts with the purpose of shaming the defaulters.

A business law expert, Chinenye Ajayi, who spoke with Technext on the matter, said the act of accessing borrowers’ contact lists for the purpose of public shaming them is unlawful because the borrowers didn’t expressly consent to the invasion of their privacy for that purpose.

“Consequently, sending messages to contacts of the applicant can be considered as an invasion of privacy if the loan applicant does not expressly consent to the specific use of that information in the manner it was used. The widely couched clauses can arguably be regarded as misrepresentation of facts as it is not specific. On this basis, the loan applicant may institute an action for an infringement of his or her right to privacy,”

Chinenye Ajayi

Previous sanctions 

According to the federal government, many money lending organizations in Nigeria are operating illegally since they are not registered with the relevant authorities.

“Initial inquiries demonstrate that many of the purported lenders are not legally established or otherwise licensed by the appropriate authorities to engage in the services they ostensibly provide.”

FG

Regarding the issue of illegal practices, recall that the National Information Technology Development Agency (NITDA) recently fined Soko Loans N10 million for various infractions against its users, including invasion of privacy and the erosion of trust.

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.”

NITDA spokesperson, Hadiza Umar on sokoLoan

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.

How can customers report cases? 

As a result of the meeting’s resolutions, Mr. Irukera stated that the commission has created a dedicated email account to receive complaints, as well as the identities of businesses or individuals participating in these practices. 

According to him, the e-mail address is [email protected]

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