The Federal Competition and Consumer Protection Commission (FCCPC) has stressed that due to the nature of their operations, a request for a total ban on loan apps is realistically impractical and ‘unworkable’.
The CEO of the Commission, Mr. Babatunde Irukera, indicated in a media interview that outright banning these apps would not effectively address the current issues because they can be used from anywhere in the world, thanks to the internet.
Mr. Irukera said that a ban would be ineffective because many other nations have the same problems and that it would only be a symbolic action. Also, some of the registered lenders have been found to establish new apps in order to continue their unethical actions. Although, any company discovered to have engaged in such behavior will have its name permanently removed from the country’s list of authorized loan applications.
For context, advocating for an outright ban on a particular industry, which can operate offshore and adapt easily, may not be an effective solution. A ban would merely be a declaration without tangible impact. Thus, according to the CEO of the commission, the focus should be on actively tracking and curbing illegal activities within the industry through collaborative efforts between consumers and regulators.
He further said:
The very hard and continuous work of tracking and reining illegality in with respect to this industry is the task we must all commit to, and it requires a lasting collaborative effort and vigilance by both consumers and regulators because it is impossible for regulators to have all the information to successfully track these businesses…The call for outright banning is ill-advised, and in most cases supported by former victims which is understandable, but insufficient for policymaking...
He further said that under an administration whose desire and focus is to expand prosperity and reach the least in society, reduce poverty, and empower the vulnerable, the mandate which regulators must embrace is the hard work and road to accomplish that, not the supposedly easy approach of blanket bans and grandstanding.
Read Also: 5 instant loan apps that can help you get cash quickly in 2023
Loan apps getting clamped down for months
In recent months, the Nigerian loan app industry has become a focal point of attention and scrutiny from the Federal Government. A report by ICIR has revealed that the loan apps in Nigeria operate largely without regulation, allowing debt collectors to employ unconventional tactics in their efforts to shame defaulting borrowers into repaying their loans.
The government has been closely monitoring the activities of loan apps, particularly due to concerns raised by citizens. In April of this year, the Federal Competition and Consumer Protection Commission (FCCPC) approved a total of 173 digital lending platforms to operate in Nigeria.
Out of these, 119 have obtained full approvals, while 54 have conditional approvals. The registration and approval process implemented by the FCCPC is aimed at safeguarding Nigerians from potential fraudulent activities associated with loan apps. This is no surprise as numerous reports of harassment by these apps have been received, prompting the commission to take decisive measures.
To regulate the digital lending space and ensure accountability, the FCCPC released the ‘Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending 2022.’ This framework mandates companies seeking to operate in the digital lending space to undergo registration and obtain approval from the commission. The objective is to create a safer environment for borrowers and protect them from unscrupulous practices.
Google responded to the FCCPC concerns by updating its Personal Loans policy on the Play Store. This update restricts loan apps from accessing sensitive user information such as photos, external storage, videos, contacts, precise location, and call logs. Google’s action aims to shield consumers from potentially predatory lending practices by certain lenders that have resulted in borrowers facing harassment.
Overall, while the Nigerian government, through the FCCPC, and tech giant Google, are taking steps to address the issues surrounding loan apps and protect consumers from any exploitative practices, banning the industry is impossible.
Read Also: Credit score: How loan apps determine the amount to lend you
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