- This is likely to limit high cases of debt-shaming in the country synonymous with digital lenders.
- DLAK has been pushing for the reversal of the listing freeze sighting opaqueness in credit issuance.
Image: FILE
Digital lenders will have to comply with data protection laws or risk licenses canceled if the Central Bank (Amendment) Bill, 2021 sails through.
On Friday, the National Assembly Committee on Finance and National Planning has asked the Central Bank of Kenya to collaborate with the Communication Authority of Kenya (CA) and the Office of the Data Protection Commissioner to audit the digital lenders' compliance to data privacy.
This is likely to limit high cases of debt-shaming in the country synonymous with digital lenders.
Some digital leaders have in recent times accessed borrowers' mobile phone contacts, texted or called friends and relatives demanding repayment of loan arrears.
''This is an extreme breach of data protection laws and should be dealt with accordingly,'' the Gladys Wanga led committee said in a report issued Friday.
Elsewhere, in what appears to be a win for digital lenders, the Parliamentary Committee has allowed them to access and list borrowers with credit reference bureaus (CRBs) under the proposed ‘digital lenders’ law.
This follows lobbying by not just the coalition of digital lenders led by the Digital Lenders Association of Kenya (DLAK) but also the Central Bank of Kenya (CBK).
“The Committee agreed to the proposal so that the digital lenders are allowed to disclose any positive or negative information of its customers to the licensed credit reference bureaus,'' the Gladys Wanga led Committee said.
DLAK in sittings with the Finance Committee had pushed for the return of digital lenders to the CIS system highlighting the role of CRBs in credit issuance.
“Many Kenyans lost the credit history reports that would enable them to obtain credit at lower risk-adjusted rates,” DLAK told the Committee.
Digital lenders were ousted from listing Kenyans with CRBs in April last year with the CBK citing the abuse of the credit sharing platform by the players.
DLAK has been pushing for the reversal of the listing freeze sighting opaqueness in credit issuance.
From the lockout, DLAK says the value of loans disbursed monthly halved to just Sh2 billion on the backdrop of the freeze.
The lifting of the ban is likely to see the number of Kenyans listed with CRBs spike on the back of elevated loan defaults covering the pandemic period.
For instance, data from CRBs shows the number of ‘blacklisted’ Kenyans crossed the three million mark at the end of last year from the pandemic-driven defaults.
The National Assembly Finance and National Planning Committee has allowed the CBK to license the digital lenders. It has also given the apex bank the mandate to set parameters on the pricing of digital loans.
Last month, CBK said licensing of digital lenders will grant it an oversight role, leading to a robust credit market and consumer protection.
DLAK wanted the proposed law to limit them to registration rather than licensing, saying this will prove costly for them.
''We would like to suggest that regulation should focus on the registration process instead of licensing. This is a common practice for the digital lenders regulations implemented in significant jurisdictions in the EU like Spain and Poland,'' DLAK said.
However, digital lenders will not be subjected to capital adequacy and minimum liquidity requirements with the Committee noting that they pose no risk to public funds.
Digital lenders will have six months to comply with new regulations while the CBK has been granted a window of 60 days to respond to license applications.
The National Assembly is expected to pass the proposed law in the coming weeks.