Federal Competition and Consumer Protection Commission (FCCPC) gears up to address challenges posed by digital money lenders, unveiling plans for 2024 regulations.
In a bid to confront the mounting issue of Nigerians’ indebtedness to digital money lenders (DMLs), commonly known as loan apps, the Federal Competition and Consumer Protection Commission (FCCPC) has declared its intention to devise a robust regulatory framework.
This revelation was made by Mr. Babatunde Irukera, the Chief Executive Officer of the Commission, during a recent appearance on a live TVC program on Monday.
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Irukera highlighted the pressing concern surrounding the burgeoning indebtedness to DMLs, identifying it as a significant industry challenge that demands immediate attention. Earlier interventions by the FCCPC to curtail predatory lending practices utilized by some loan sharks resulted in a shift in their debt recovery strategies, prompting a considerable number of loan apps to modify their approaches.
While these interventions successfully reduced the prevalence of abuse and harassment by loan apps, Irukera pointed out that default rates among borrowers continued to soar. He warned about the potential collapse of digital lenders critical to the economy if this trend persists.
Addressing Default and Ethical Recovery Measures
Emphasizing the need to shift away from unethical loan recovery mechanisms, Irukera said: “One of the big issues that we’re seeing is that there’s now a significant level of loan default because people are not able to use these unethical and inappropriate loan recovery mechanisms and I’m insistent that you cannot say to me that the only language Nigerians understand is to abuse them. No, I disagree.
“We must necessarily do the work no matter how hard it is to find a more sensible way to recover loans because I also agree that if these digital money lenders are unable to recover their loans and drop out of the market, it’s a consumer protection problem because of those who need those types of short-term unsecured lending.”
He advocated for a balanced approach to responsible borrowing and lending, hinting at upcoming regulations in 2024 aimed at fostering fiscal responsibility among individuals and corporations.
“So, we have to find the balance and so some of the regulations that will come out in 2024 will be a broader approach to responsible borrowing and responsible lending by individuals and corporate,” he said.
Highlighting the significance of a centralized credit system, Irukera proposed extending reporting capabilities to various entities, such as school landlords, to contribute to assessing an individual’s creditworthiness. He suggested that limiting access to credit based on one’s fiscal responsibility could incentivize self-regulation among borrowers and enhance loan recovery.
“I’m hopeful that the future of what we’re building is that even school landlords would be able to report to a centralized credit system about the conduct of tenants, students, and parents so that we can know each person’s level of fiscal responsibility or credit wordiness,” he added.
Progress and Ongoing Efforts
Under the interim regulatory framework, the FCCPC has made substantial strides, witnessing an 80% reduction in harassment and defamatory practices by loan apps. However, acknowledging the remaining 20%, Irukera affirmed that efforts are underway to address these challenges.
The Commission has taken steps to register over 200 loan apps, a move aimed at sanitizing the digital lending market and eradicating unethical practices such as defamation and harassment of borrowers. As of the latest update, the FCCPC has approved a total of 211 digital lenders, illustrating its commitment to streamlining the sector.
Addressing the regulatory challenges of emerging industries
Irukera noted the evolving nature of the interim regulatory framework, citing the emergence of fintech not just in Nigeria but globally. He stressed the importance of learning from industry operations and dynamics to develop an optimal regulatory ecosystem.
The CEO expressed optimism regarding the upcoming 2024 regulations, foreseeing their emergence as a pivotal moment in reshaping the lending industry. These regulations aim not only to protect consumers but also to foster responsible borrowing practices and ensure the sustained operation of digital money lenders integral to the country’s financial sector.