Mobile lenders to inform borrowers of listing with CRBs month prior

KNCCI, Digital lenders partner to provide credit solutions to SMEs

Digital lenders are now required to notify loan defaulters a month prior, before presenting their names to the Credit Reference Bureau (CRB).

This comes after changes were made to the Consumer Protection Act which saw the Central Bank of Kenya (CBK) become an overseer of all-digital lending platforms.

The new act that will run from 2022 to 2025 saw the digital credit providers set out to put a set of principles that will help govern the costs that come with digital payments and mobile banking.

The set of principles also put into account the obligations of digital lenders who are required to hand out a 30-day notice, either through electronic means or through writing by September 18, 2022.

The act came about after the regulator highlighted various challenges within the digital lending platform, including the misuse of private customer information. This led to all digital lenders being asked to seize filing reports with CRBs in April last year.

“A digital credit provider who intends to furnish negative information to a bureau concerning a customer shall, in writing or through electronic means, notify the customer of the intention to submit the negative information at least 30 days before submitting the negative information to the bureau,” stated the principles.

As with banks, SACCOs, and other companies now using the system, the CBK will also oversee the usage of credit information sharing which is the most significant risk-management tool available to microlenders.

CBK will have full powers to license and oversee the previously unregulated digital credit providers who have been accused of charging very high-interest rates and harassment of defaulters.

“The Regulations provide for inter alia the licensing, governance, and credit operations of Digital Credit Providers (DCPs). They further provide for consumer protection, credit information sharing, and elaborate on the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) obligations of DCPs.” says CBK.

The new law explicitly grants Central Bank the powers to determine pricing parameters. This will ensure that CBK does not necessarily set the lending rate but rather provide parameters within which digital credit providers shall set their cost of credit.

The digital lenders who are not regulated by CBK and are operating within the Kenyan marketplace have until June 2022 to comply with registration requirements.

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.

Digital lenders have until September 18 to comply with all the requirements and get operating licences from the CBK.

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