Mobile loan apps now face stricter regulations …September 5, 2022
Mobile loan apps face stricter regulations starting September 17 2022. And what that means for the borrower is greater peace and less predatory lending.
The Digital Credit Providers Regulations, 2021 by Central Bank of Kenya requires all digital lenders to abide by the consumer rules. Only apps that meet the stringent regulations will get the licence to operate.
The new mobile loan apps regulations
There will be no more naming-and-shaming tactics. Your friends and relatives will no longer receive calls about that loan you took in case you default.
Also, the mobile loan apps shall disclose the total amount you will have to pay at the end, the interest amount, and any penalties.
In case there is a default, the lender must have informed you the rollover fees. This should be before giving you the loan.
“Most people have applied and there is just a bit of small documents being asked for. We expect in the two weeks a memo from CBK with a list, some names will be there, others will drop off,” said Digital Lenders Association of Kenya Chair Kevin Mutiso.
That means the numerous loaning apps will reduce.
Apart from the mobile digital lenders, stricter regulations apply on cross border payment platforms. Some of them are accused of money laundering.
Previously, digital lenders were not regulated by the Central Bank of Kenya until the law was changed in 2021. This made many of them adopt predatory tactics that not only shamed borrowers but also drove them into debt traps.
Requirements for the mobile lenders
These are some of the requirements for mobile loan apps to get their licences this year:
- Furnish the regulator with a Certificate of Incorporation, Memorandum and Articles of Association of the applicant and that of any significant shareholder.
- Disclose source of funds and pricing models.
- Directors, chief executive, senior officers and significant shareholders to undergo a fit and proper test.
The CBK can revoke licences of loan apps that send information about loan defaulters to third parties.
There are more than 100 digital lenders which do not require CRB reports to lend. They use unethical tactics to recover high interest easy loans. They were expected to raise interest after the government raised tax.