Nigeria’s Federal Government Cracks Down On Digital Loan Sharks

Nigerian authorities are shutting down illegal online lending firms that use deceptive schemes to hook consumers.

Many Nigerians have had to take loans from unscrupulous online lenders during the pandemic period. Those with no means to earn a living had no option but to accept exorbitant interest rates. The online lenders they turned to were mostly Chinese-owned.

The simplicity of the online applications for those seeking loans has hooked many Nigerians.

On Google, the policy rules for lending apps require companies to leave a 60-day period between the approval of a loan and the repayment date. The loan providers that target Nigerians display those rules, but in practice their repayment periods are shorter.

It is also only once the loans are disbursed by these companies that consumers become aware of the outrageous interest rates. Loans are disbursed quickly and consumers are often slow to notice the harvest of their personal details and contacts.

Nigeria’s Federal Competition and Consumer Protection Commission (FCCPC), National Information and Technology Development Agency (NITDA) and Independent Corrupt Practices and Related Offences Commission (ICPC) stepped in last month.

Authorities raided the offices of digital lenders suspected of operating illegally in Ikeja, Lagos. Digital lending platforms like GoCash, Okash, EasyCredit, Easi Moni, KashKash, and Speedy Choice were ordered by the authorities to close down.

The FCCPC said the loan companies were not Nigerian-owned and were not registered or licensed to operate in the country..

Unethical recovery methods

Nigerian authorities said complaints about the violation of private data and loan recovery methods prompted an investigation into the online lenders in 2020.

The head of the FCCPC, Babatunde Irukera, told reporters recently that it was unethical to violate the privacy of customers to abuse and shame them and their acquaintances.

The recovery of debts owed to these companies is a lucrative business for debt collectors, according to the International Centre for Investigative Reporting (ICIR). Collection agents are reportedly paid a weekly bonus of three percent of the debt sums recovered.

Nigeria’s financial sector regulators are working to identify more illegal loan providers in order to close them down.

The federal government has already frozen the bank accounts of over 30 illegal loan providers. It has also ordered Google LLC (Play Store) and Apple Inc. (App Store) to withdraw certain applications held by illegal online lending firms. The Android and iPhone apps they use to lure consumers are also being deactivated.

Nigeria’s central bank governor Godwin Emefiele says that despite the recent success in shutting down “loan sharks”, identifying these companies remains a challenge because of the underground nature of the business.