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No More Debt-Shaming by Digital Lenders as Uhuru Signs CBK Amendment Bill into Law

Digital lenders to be regulated by CBK

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Borrowers can now breathe a sigh of relief after President Uhuru Kenyatta signed the Central Bank Amendment Bill on Tuesday. The new law gives The Central Bank of Kenya (CBK) the mandate to withdraw operating permits from lenders who violate data privacy standards under the new law. Digital lenders have been given six months to obtain operating licences from the annex bank.

Digital lenders in the form of mobile loan apps are notorious for engaging in debt-shaming tactics in efforts to recover money owed by their borrowers. For instance, once they get access to your phone book and messages, they are known to send messages to your contacts alerting them of your failure to repay the loan.

“The bank may suspend or revoke a license by written notice to the holder of the license if the licensee (digital lender) is in breach of subsection (2A) or the conditions of the Data Protection Act or the Consumer Protection Act,” the law reads in part.

Read: How Zash Loans Harasses Borrowers with Insults and Intimidations on their Platform

Under the new law, CBK is also expected to publish a list of all licensed lenders in the Kenya Gazette.

‘The law requires every person intending to undertake the business of a digital money lender to first obtain a license from CBK. This is to ensure discipline in the market,” Uhuru said.

When signing up for mobile loans, lenders require borrowers to provide their personal information including their professions, location, and monthly earnings. They also give the apps permissions to access data from their mobile phones including text messages and phone contacts.

Read also: Digital Lenders Cut Loans to Shield Themselves from Defaulters following CRB Directive

The lenders will be required to get permission from the Data Commissioner’s Office, which is in charge of handling and protecting citizens’ personal data. The Data Protection Act makes it illegal to share personal information with third parties without their consent. It also necessitates the handler’s disclosure of their purpose to divulge personal data as well as the justification for doing so.

Interested digital lenders will henceforth be required to share the agreement they have with the telecommunication services provider that will support its services and the proposed terms of service with CBK

The signed law does not give a cap on the interest rates charged by digital lenders, however, CBK is required to assess the products and ensure borrowers are charged reasonably.

Read also: List Of Mobile Loan Apps That Have Been Barred From Accessing CRB Services

Last week, CBK Governor Patrick Njoroge expressed his support in the move to tame Digital Lenders who he said were operating as modern-day shylocks.

“This is to provide the central bank with the authority to regulate the digital lenders. This is something which has been long overdue, that we’ve come all this way and we are looking forward to it becoming law,” Njoroge said during a post-Monetary Policy Committee press briefing last week.

In accordance with the Data Protection Act, CBK will be allowed to revoke and suspend licenses of digital lenders that do not disclose all information to their borrowers.

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Written by Vanessa Murrey

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