Once the due date arises the borrowers will start getting notices/calls that all his contacts would be informed about his loan default. In order to prevent being shamed, he would hurriedly apply for another loan to clear the one that is due. Taking loans to pay pending loans leads lenders into a vicious cycle of short loans.
The strongest weapon in the hands of digital money lenders is the access to the full contacts list of the borrowers. At the point of applying for an online loan, applicants are made to voluntarily give access to information contained on their phones.
Some lenders even go to the extent of asking applicants to take and upload selfie pictures before their loan is approved. This picture would later be used to shame the lender if he defaults.
Over the years, these loan apps have been contravening Nigerian laws as regards cyberbullying, harassment, defamation and breach of data privacy rights of their customers with impunity.
Federal Government Clampdown on Unethical Loan Apps.
Some days ago, the Federal Government agencies namely: the Federal Competition Consumer Protection Commission (FCCPC) in partnership with the Independent Corrupt Practices and Other Related Offences Commission (ICPC), the National Information Technology Development Agency(NITDA) and the Nigeria Police Force (NPF), went to Lagos offices of some of these illegal loan apps operators and shut them down. For the sake of intending borrowers, who might fall into their trap, the list of the seven unethical online loan lenders are as follow:
- GoCash
- OKash
- EasyCredit
- Kashkash
- Speedy Choice
- Easy Moni
- Sokoloan.
It was also revealed that the first six loan apps on the list are being operated by Blue Ridge Microfinance Bank Limited, while only Sokoloan has a different operator. I will come back to the implication of the same ownership later in this piece.
Shame Weaponization, Without Compensation After Repayment
At the point of borrowing, the loan applicant is made to submit names of two or three guarantors. These could be friends, spouses or colleagues at work. What is worrisome is that, instead of contacting the guarantors when the lenders default on repayment, the digital loan apps will call or send text messages via SMS or WhatsApp to all saved contacts available on the lender’s phone.
The defamation could have been bearable if the sent text messages are truthful as regards, stating clearly the amount that is being owed. In most cases these digital lenders use derogatory, abusive and demeaning words to shame, harass and dehumanize defaulting lenders. Many of the victims have reported having mental health issues and suicidal thoughts.
Below are two typical messages sent by one of the digital lenders to one of the loan defaulters. I have anonymized the messages, in order to protect the name and details of the person concerned.
BREAKING NEWS
THE ……. NEWSPAPER
8, FEBRUARY,2022
PUBLIC NOTIFICATION
THIS IS TO INFORM THE GENERAL PUBLIC THAT *Customer’s name* WITH MOBILE NUMBER *000000*,RESIDENTIAL ADDRESS:0000000.
HE HAS BEEN DROPPING DIFFERENT CONTACTS WITH DIFFERENT LOAN APPLICATION IN NIGERIA AND IT CAME TO OUR NOTICE THAT THE CONTACTS OF LSAAC ITINMO ABUH ARE NOT AWARE ABOUT SUCH ACT. ACCORDING 1999 CONSTITUTION AS AMENDED SUCH ACT IS PUNISHABLE BY LAW.
KINDLY INFORM HIM TO RETURN ALL THE MONEY SHE TOOK FROM THOSE ONLINE APPLICATION OR ELSE BOTH THE CONTACT WILL BE LIABLE TO THE LAW.
Good day, I am *Customer’s name* with phone number: *00000000* Home address: 00000000000 Email:00000000. I have failed in my life. I cannot repay the loan I owe . My apologies to my parents, my family: my brother *mobile line*, and all my friends. I now beg everyone to help me. For the sake of my parents. I am here by soliciting for help from everyone to lend me a little money in order to repay the loan and give me a new life opportunity. Thanks.
Be that as it may, if and when the lender pays up the loan, these unethical digital lenders wouldn’t send a follow up message to notify friends and family that the loan has been paid off. Doing this would have at least redeemed the image of the lenders.
On top of recovering the principal, they force the poor borrowers to pay the overdue charges, even after defaming them. This is pure cruelty. Some of the lenders could waive 30 to 40 percent of the overdue charges.
Debt Trap: The Vicious Circle of Short Loans
Most of the online charges are between 30 to40 percent interest rates for a 7 days loan. The longest duration is usually 14 days.
The shortness of duration makes it extremely difficult for lenders, mostly un/under-employed informal workers, to make repayment on the due date.
Once the due date arises the borrowers will start getting notices/calls that all his contacts would be informed about his loan default. In order to prevent being shamed, he would hurriedly apply for another loan to clear the one that is due. Taking loans to pay pending loans leads lenders into a vicious cycle of short loans.
The lender might have used GoCash to get the first loan which is pending, and rush to get another loan on OKash to pay the overdue loan on GoCash. At the end of the day, the lender could end up servicing loans on four to five different apps being operated by the same company.
More Actions from Regulatory Agencies are Needed
I understand that getting short loans from digital lenders could be useful when one is boxed into a financial tight corner. However, the greatest challenge is the penetration and operation by unethical operators. There are still ethical lenders, who still respect the rights of their customers.
The Federal Government still needs to do more to ensure that unethical digital lenders cease to operate in Nigeria. The seven digital lenders currently being investigated are not the only ones trampling on the fundamental human rights of vulnerable Nigerians. For instance, the digital lender whose derogatory messages are cited above still operates freely.
The regulatory agencies need to do more to ensure digital loan apps operating in Nigeria abide by professional, ethical and legal regulations.
Olusoji Ajao
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