CBK stops digital lenders from calling customer contacts in debt collection

Digital lenders will no longer make unauthorised and unsolicited calls or messages to a customer’s contact in the quest for debt recovery.

This is part of new draft regulations published by the Central Bank of Kenya (CBK) on Thursday as it begins to rein in the operations of the previously unregulated lenders following a law change.

The CBK (Digital Credit Providers) Regulations, 2021 which are now the subject of input from stakeholders until January 21, block the digital lenders from threatening debtors while recovering loans from them.

The regulations also bar the use of obscene language, improper debt collection tactics and other conduct whose consequence is to harass, oppress or abuse persons in connection with the collection of a debt.

Further, the CBK is set to limit interest recoverable from non-performing loans (NPLs).

The maximum amount of interest recoverable from a customer after a default for instance must not surpass the principal owed when the loan becomes non-performing.

Moreover, the CBK will require digital lenders to provide clear disclosures of the terms and conditions of the loan to the borrower including charges and fees, interest rate to be charged, the total cost of credit, the dates when all charges become payable and customer complaint handling procedures.

Digital lenders will nevertheless be allowed to list negative credit information pertaining to borrowers with Credit Reference Bureaus (CRBs) but must inform borrowers of the planned listing at least 30 days prior.

However, digital lenders will not submit negative credit information of a customer where the credit information does not exceed one thousand shillings.

The CBK has directed that all unregulated digital credit providers provide their business details by January 21, 2022.

The credit providers will have six months from the publication of the final regulations to apply for licensing with the CBK.

Licences to the dealers will be provided within 60 days of the application while the CBK is to certify Directors and Chief Executive Officers (CEOs) to the digital credit providers.

The new draft regulations have been powered by the 2021 Central Bank of Kenya (Amendment) Act which brought digital lenders under the scope of CBK regulations.

The CBK has previously fingered the digital lenders for serving pain to Kenyans by disbursing quick but expensive loans with atrocious debt collection terms attached.