The Federal Government of Nigeria through the Federal Competition and Consumer Protection Commission (FCCPC) has issued an order to all financial technology (FinTech) companies to stop providing payment or transaction support to digital money lenders otherwise known as “loan sharks” that are under investigation.
This was communicated by the Executive Vice Chairman of the commission, Babatunde Irukera who disclosed this to reporters on Thursday during an enforcement action on some of the digital money lenders in Lagos.
In his statement, he named specific FinTech companies such as Flutterwave, Opay, Paystack, and Monify, that are either operating payment systems and offering services to digital lenders that are the subject of its investigation or are not doing so in accordance with the necessary regulatory approvals.
Mr Irukera said the commission also ordered telecommunication and technology companies which include Mobile Network Operators (MNOs) to stop providing server, hosting or other key services such as connectivity to such disclosed or known lenders.
What are Loan sharks?
Recall our earlier report that in a sweeping move to clip the wings of the loan sharks, federal government officials from the Federal Competition and Consumer Protection Commission (FCCPC), National Information and Technology Development Agency (NITDA), and the Independent Corrupt Practices and Related Offences Commission (ICPC) last week raided the offices of loan platforms in Ikeja, freezing their accounts and shutting them down.
The FCCPC is currently looking into Soko Lending, one of the numerous well-known loan businesses that are sometimes referred to as “loan sharks.”
Loan sharks like Soko Lending, are companies that offer loans to people through a variety of channels and platforms, most notably digital platforms.
Mr Irukera asserted that the Federal High Court has given the commission authority to search and confiscate property from the premises of targets and subjects of investigations in his firm warnings to these fintech companies.
According to him, this prompted the commission to take legal action against Soko Lending Ltd.
“The information available to the commission demonstrates that Soko Lending appears to be the most consequential digital money lender with multiple apps and brand names. It is covering a significant share of the digital or online lending market, and is one of the most prolific actors in violating consumer privacy, fair lending terms and ethical loan repayment/recovery practices.”Babatunde Irukera, Executive Vice Chairman of the commission
“Prior to this operation, the commission had previously, on March 11, 2022, carried out a similar enforcement action with respect to multiple lenders; which action and continuing investigation has reduced previously high and escalating unethical, obnoxious and unscrupulously exploitative practices in the industry,” he added.
However, he claimed that some of the lenders under investigation had developed strategies to get around account freezing and app suspension orders by utilizing technology and other alternatives to traditional financial services.
“With the operations today, the commission expects an appreciable additional reduction in these unacceptable practices. The commission has also today entered further Orders that will disable or diminish violators’ ability to devise circumvention efforts or alternative mechanisms to circumvent the objective of the investigation and protection of citizens,” Mr Irukera added.
According to him, the order requires permission to proceed in digital lending; it provides a limited moratorium period for existing businesses to comply in order to continue in digital lending.
“The guidelines also mandate different service providers in the relevant ecosystem such as banks, access/download platforms or stores, technology providers and payment systems to require regulatory approval before providing services.
“The commission expresses its gratitude to victims and citizens who have provided information or contributed to the investigation; and welcomes the continuing engagement that provides the relevant information or intelligence through the already established and publicised channels,” the FCCPC boss said.
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