By Jaindi Kisero
I am compelled to return to the raging debate that has been provoked by last week’s decision by the governor of the Central Bank of Kenya, Dr Patrick Njoroge, to introduce regulations prohibiting unregulated mobile phone lenders from reporting defaulters to credit reference bureaus (CRBs) because of the feedback and public interest I received from the article which I wrote on the same subject last week.
I received loads of e-mails and telephone calls from hundreds of readers telling heart-wrenching stories of the suffering and pain they had endured at the hands of these modern-day Merchant of Venice. It was clear to me that the governor, in cracking down on the lenders, had acted on a matter touching on huge public interest.
He deserves commendation for putting on the spotlight those greedy lenders who have been mushrooming and taking advantage of loopholes of weak consumer protection regulation to commit the biblical sin of usury and mint billions from the poor.
The action came hot on the heels of an exposé by the US publication Bloomberg BusinessWeek that gave a gripping narrative on abusive practices of mobile digital lenders, included an in-depth look at the exploits of one of the leading brands, Tala.
The story made sensational revelations about how mobile digital lenders have been abusing borrowers, lending them money at rates as high as 1,000 per cent per year — trapping the poor into high and unsustainable debt — and clogging CRB databases with loans as low as Sh1,000.
With the high penetration of M-Pesa, these unregulated lenders had turned Kenya into the test laboratory of choice for payday loans.
Another attraction and explanation for the proliferation of these unregulated lenders was the arrangement that permitted them to report defaulters to CRBs, thus making mobile lending business less risky. With the CRB route now shut, we must now hope that attention will focus to how to stop abuse of laws regulating protection of private data.
Dr Njoroge should now seek co-operation with entities such as the newly created Office of the Data Protection Commissioner and the Communications Authority of Kenya to seal the loopholes used to circumvent abuse data protection laws.
Today, as you respond to a beep on your mobile phone, it is not uncommon to see an alert from an unregulated lender offering to lend money you have not asked for. Which begs the question, how do these unregulated lenders access your personal data? How do they get the details of people on your contact list?
One of the most revealing findings in the Bloomberg expose is that these lenders had gone to the extent of mining personal data on defaulters from the National Hospital Insurance Fund — of all the places! This despite the fact that the law demands that personal data must not be released to a third party without the consent of a consumer.
Which brings me to a predicament I experienced with mobile phone lenders.
I was on my way to work when I received a telephone call from a debt collector who, out of the blue, claimed that I had defaulted on a Sh3,500 loan to a mobile phone lender and risked being reported to a CRB if I did not repay the debt immediately.
I tried to explain that I had never borrowed from, let alone had any dealings with, that specific mobile lender. I requested the caller to check her records again and to revert to me and cautioned he that if she scrutinised the records properly, she would discover that I had never even as much as downloaded the app of that specific lender on my phone.
Many months later, I was surprised to discover that I had been listed by a CRB for allegedly defaulting on that small loan of Sh3,500.
Payday lenders do not invest in robust customer service departments that can check records to determine the truth or not of complaints by consumers.
Eager to get cheap labour, they outsource customer care with little training. Their typical call centre is an entity staffed by burnt-out staffers with no sense of human touch, providing a service not much different from what you get from automated answering machines.
I found myself being taken round in circles between the mobile lender, debt collectors and a CRB I had been referred to. After more than three months of back and forth, I decided to pay that small debt, clear my name and lodge a formal dispute later.
To my surprise, the ordeal did not end there: To date, my name remains in the bad books! Even after you have cleared your debt, and despite the lender acknowledging receipt of payment, they still expect you to be the one to chase them to remove your name from the blacklist. We badly need a credit markets ombudsman.