The credit information sharing industry in Kenya received a boost after the Credit Information Sharing Association of Kenya (CIS Kenya), launched a code of conduct governing unregulated credit information providers.
The code of conduct was launched in Nairobi on Thursday, coming barely four months after the Central Bank of Kenya (CBK) approved a proposed code, governing such participants after amending its regulations last year to allow such a mechanism to be developed by the industry.
This code is primarily aimed at meeting three key objectives which include data quality, consumer protection and customer-centricity.
It comes amidst numerous complaints about how Credit Reference Bureaus (CRBs) were being abused and consumers being mistreated.
“Currently, the regulated lenders are required by the law and Central Bank to submit accurate data. So, CIS Kenya, under the code, will be checking the quality of that data to ensure consumers are not disadvantaged by inaccuracies,” said CIS Kenya Chief Executive Officer Jared Getenga.
Getanga also said that “some of the inaccuracies could be about when you repaid the loan. If the update is not done regularly, then that disadvantages the recipient. For some lenders, when information from other lenders is not accurate, then some of them expose themselves by either lending too much or too little.”
He decried the “unacceptable” treatment of consumers by some credit providers whom he accused of resorting to illegal methods to coerce defaulting consumers to repay their debt or even access funds in future.
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“How I am treated as a consumer needs to be changed. For some people, the way they are mistreated includes being threatened, that if you don’t pay my loan, I am going to put you in the CRB. Anyone who has approval to share data with the CRB should not use that language because, in any case, whether I am paying or not paying, that data is being submitted. So, it cannot be if you don’t pay, I will report you. That is not acceptable.”
According to local reports, Kenyans have been subjected to high interest rates on loans and punitive debt collection measures, like debt-shaming, with a rise in digital lending platforms coupled with tough economic times.
Such incidents, Getenga noted, had prompted the need to establish a robust framework to govern the industry and correct such malpractices.
“The Central Bank has advised us that all credit providers who participate in the mechanism must subscribe to this code of conduct so that they can now identify with the provisions of the code and they be able to be supervised by CIS Kenya with cooperation and support of the Central Bank,” Getenga said.
He, however, clarified that the launch of the framework did not mean the CBK was no longer involved in the regulation of the industry as the code was aligned to the CBK’s requirements.
A technical committee consisting of industry players will be established to analyze the performance of signatories to the code and monitor complaints and any issues arising in the industry. The committee will then submit a report every quarter to the CBK for action.
Getenga assured the public that this new development will not be taken lightly and CIS Kenya will closely scrutinize operations and penalties against violators of the code and will be determined by the “seriousness” of the CBK.
In April this year, CBK extended the list of third party Credit Information Providers (CIP) to 1,994 institutions, which will see more data, provided to CRBs.
Any of the 1,994 entities will be obliged to provide information on borrowers to guide CRBs in determining their creditworthiness.
CIS mechanism is regulated in accordance with the CRB Regulations (2020).
The Regulations require that customers are protected and a mechanism for handling customer complaints be in place to ensure customers’ complaints or disputes are handled expeditiously.
The third party credit information providers serve to complement information provided by mandatory CRB subscribers, commercial banks, micro-finance banks and deposit-taking SACCOs.
Credit providers who have not yet signed up to the code must do so by December 31 in order to continue participating within the industry or risk facing tough sanctions against them.
Some of the sanctions include imposition of financial penalties, removal from the approved list of CIS framework – taking away the ability to submit and view data from the credit reference bureaus – in addition to other measures at the discretion of the central bank.
The code will also go a long way in helping Kenya stand out in Africa by improving its credit rating and overall transparency of its financial system.
“Credit information sharing is a very big criteria in the rating of countries and their financial systems. Kenya has already scored very highly by virtue of the breadth of information that is in the credit reference bureaus considering there is a lot of credit going on in the market and there are a lot of entities that are participating in the bureaus.”