By Judith Gicobi
Under guidelines that grant the Central Bank of Kenya (CBK) authorities to reign in lending rates and violation of consumer privacy, digital loan defaulters would receive a 30-day notice before their identities are forwarded to credit reference bureaus (CRBs).
The Central Bank of Kenya’s (Digital Credit Providers) Regulations prohibit digital lenders from listing defaulters’ names without their consent.
From September 18, digital lenders, like commercial banks, will be required to notify defaulters of their listing in writing or via electronic methods a month before publishing their status with the CRBs.
Defaulters are currently notified of their planned listing with the bureaus as a weapon to compel loan repayments, but they are not required to offer the 30-day notice.
“A digital credit provider who intends to furnish negative information to a bureau with respect to a customer shall, in writing or through electronic means, notify the customer of the intention to submit the negative information at least 30 days before submitting the negative information to the bureau,” say the regulations.
Following complaints of widespread exploitation of the credit information sharing system, digital lenders were forced to stop filing reports with CRBs in April of last year.
The lenders were accused of using aggressive practices, such as scaring borrowers with negative listings, when giving credit via mobile phones and the Internet.
Changes to the CBK Act, on the other hand, brought digital lenders within the banking regulator’s oversight and permitted them to share borrowers’ data with the CRBs.
As with banks, Saccos, and other companies now using the system, the CBK will oversee their usage of credit information sharing.
Credit information sharing is one of the most significant risk-management tools available to micro lenders who often do not need borrowers to provide collateral when making short-term loans.
The new law also gives the banking regulator the authority to terminate the licenses of digital lenders that violate personal data confidentially.