Parliament committee approves law seeking to tame digital lenders

Parliament’s Finance and National Planning Committee has approved the Central Bank of Kenya (Amendment) Bill 2021 and added a clause that gives the CBK powers to price interest rates for digital loans.

The highlights of the proposed regulations include curbing steep digital lending rates and rouge actors who use debt shaming as a way of collecting payments.

Further if the bill is approved, CBK will also control products that are put out by the digital lenders and also data from the borrower.

According to the Digital Lenders Association of Kenya (DLAK), the proposed law will help in curbing rouge actors in the sector who have tarnished its reputation.

“This is good news for the sector. This will see rouge actors tamed and more importantly the CBK will provide guidelines that will see proper pricing in the sector,” said Kevin Mutiso, Chairman, DLAK.

Failure to comply with the new regulations if passed will lead to action being taken against the lenders .

“Rouge actors will have a very hard time operating . If they breach the regulation this will see the company and its directors taken to court , fined and also some might lose their positions,” added Mutiso.

The Bill has dropped any minimum capital requirements from the bill since fintech lenders are not deposit-taking.

The Central Bank will also have up to 30 days upon receipt of application documentation to either issue a license to a fintech or notify them of the decline in approval.

The committee agreed to delete the provision giving CBK powers to approve business models as this will create unnecessary hurdles and digital lenders must be allowed space to innovate.

“When the law is passed this will see many of the lenders focus on specific sector when it comes to lending…,” added Mutiso.

The regulations come at a point when some digital lenders have been accused of unethical debt collection tactics and also curb the steep digital lending rates that have plunged many borrowers into a debt trap as well as predatory lending.