Nigerian loan apps that send messages to their debtors’ contacts could be sued for privacy breaches in the future.
In an announcement last week, the National Information Technology Development Agency (NITDA) said it had received 40 petitions from the public about companies abusing user data and it appears the agency has started donating following these complaints. In August, NITDA fined Soko Lending Company 10 million naira ($ 24,000), owners of sokoloan – an app launched in September 2018 that has over 1 million downloads from Google Play Store (but appears to have been removed at time of publication.)
NITDA, Nigeria’s de facto technology regulator, says it is concerned about the damage done by lenders like sokoloan. And that’s how collaboration with the Federal Council for Competition and Consumer Protection, the Nigerian consumer protection and antitrust watchdog body, to enforce privacy rights in accordance with the Nigerian Data Protection Regulation (NDPR) promulgated in 2019.
Loan apps threaten to bankrupt users
Because Nigerian banks prefer to lend to businesses, not individuals, new companies have filled the void by offering quick loans through smartphone apps. Startups like Carbon, Branch, and Fairmoney started out as simple app-based money lenders before their recent transition to digital banks with other services. For the most part, these venture capital funded (and in Carbon’s case profitable) companies largely maintain a good reputation with clients and are licensed by the Central Bank of Nigeria.
But there has been a new wave of loaner apps, with almost a new one appearing on YouTube ads every two weeks. Some of these apps quickly became notorious for threatening users with damaging their reputation in order to get them to repay their loans.
In one case, a debt officer for iMoney, an app that has been downloaded over a million times from the Play Store, sent this to a debtor: “I’ll send your names to all your contacts and destroy you if you want me to lose my job because you won’t pay on time.” In another case of a borrower who was a week late for a payment of 100,000 N ($ 240), sokoloan would have sent messages to his contacts describing him as a “chronic debtor and fraudster”.
Strengthening data protection
Data privacy breaches by loan apps is not just a Nigerian problem.
In Kenya, loan apps are known to offer quick cash at high interest rates at the expense of user privacy. Last week, Kenya’s Data Protection Commissioner Immaculate Kassait said an undisclosed number of digital lenders under investigation for using shameful tactics to collect loans.
With Nigeria also promising a crackdown, African regulators appear to be marking a new era for the still emerging digital lending landscape: an era where startups are prevented from downgrading a welcome innovation that has made access to credit easier in a situation where loan sharks go to extremes to intimidate borrowers.
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