Nigerians at the mercy of shylock money lenders - THE NATION
For most Nigerians hard pressed for a lifeline to survive the rising economic crunch, the fear of shylock mobile moneylenders is the beginning of wisdom as the latter deploy extrajudicial means to get back at defaulters. In this report, Ibrahim Apekhade Yusuf and Jill Okeke capture the agonising stories of victims of shylock moneylenders.
Have you ever been completely hard up with no penny to your name such that the only option you have to make is to seek help from nobody else but a sworn enemy?
Well, this short anecdote becomes apposite in describing the Hobson choice Nigerians like Adewale Aremu (not real name) are confronted with on a daily basis as they’re forced by circumstances to borrow money from shylock moneylenders who literally seek a pound of flesh from them in exchange for a loan.
Enter the world of shylock mobile moneylenders
It is no longer news that many Nigerians have long complained bitterly about the illegal and heinous tactics employed by loan sharks. They include outright lies against defaulting consumers, invasion of their privacy and other rights violation.
Loan sharks have a history of exploiting their customers’ personal information, compromising their privacy and sharing it with those who were not engaged in the original agreement.
Furthermore, these loan app operators send embarrassing short messaging service (SMS) and WhatsApp messages to the loan defaulters’ close contacts with the purpose of shaming the defaulters.
A business law expert, Chinenye Ajayi, who spoke on the matter, said the act of accessing borrowers’ contact lists for the purpose of public shaming them is unlawful because the borrowers didn’t expressly consent to the invasion of their privacy for that purpose.
“Consequently, sending messages to contacts of the applicant can be considered as an invasion of privacy if the loan applicant does not expressly consent to the specific use of that information in the manner it was used. The widely couched clauses can arguably be regarded as misrepresentation of facts as it is not specific. On this basis, the loan applicant may institute an action for an infringement of his or her right to privacy,” noted the lawyer.
Echoing similar sentiments, Pascal Muonye, a security expert while responding to treats posed by loan sharks to third parties said one way to get a loan shark off your back when the debt he’s after is a relative’s and nothing to do with you is to first report the company or individuals in question to the police. “All you need to do is to name the loan shark. Tell the police. Tell the loan shark you did that. Firmly tell him to leave you alone. A loan shark is not likely to go as far to collect from you as he would from the person who took out the loan. He’s banking on your fear of the loan shark or your embarrassment to be related to the debtor to encourage you to pay this person’s debt.”
Loan sharks get their name because they prey on the financially weak. This includes the elderly, low-income, minorities and those with bad credit. Loan sharks operate in upscale neighbourhoods, too, but these loan sharks are less visible. Most loan sharks set up actual shops in areas where the economic situation is toughest, operating in the open next to facilities like liquor stores and casinos. By setting themselves up in these “pools” of need, their hope is that catching someone who needs money will be easier.
Some businesses operate similar to loan sharks in the way they charge interest and fees, although they don’t necessarily use intimidation tactics. A good example is payday loan businesses. These businesses give you a loan for a postdated check, but you end up paying as much as 400 percent in interest.
Getting a loan from the bank when you have bad credit can be impossible but not with a private lender as long as you can prove the loan would yield profit and the duration for repayment is agreed on, you can probably get a loan of any amount from a private lender.
All attempts to get the officials of some of these loan app companies to react to series of allegations against them proved abortive as most of them were yet to respond as of press time.
An email sent to most of them detailing the atrocities committed by their agents and staff were rebuffed.
However, a similar email to the apex regulatory body of the bank, the CBN, shed more lights on the activities of these loan sharks.
A letter from the desk of the Consumer Protection Department (CPD) sent to The Nation and signed by Aliyu, Ibrahim Tunde, Muhammad, Hamza Hassan and Kamba, Sulaiman Sani disclosed that some of the loan app companies are not register3ed by the CBN.
In the mail which reads in part, the CBN officials said it “observed that Sokoloan/Soko lending company ltd is not a licensed financial institution under the regulatory purview of the CBN. In view of the above, you are hereby advised to report the matter to the appropriate institution/ regulatory agency for investigation.”
Avalanche of petitions at FCCPC
Investigation by The Nation revealed that many victims of mobile moneylenders have had to send petitions arising from intimidation to the Federal Competition and Consumer Protection Commission [FCCPC].
At the last count, an inside source at the FCCPC revealed that over 450 complaints bordering on harassment, intimidation, violations of rights and privacy from customers of microfinance banks and other allied financial institutions.
One of the documents sighted by our correspondent showed that some of the lending houses indicted includes Spectrum, Lapo, Accion, Palmcredit, Next, AB, Wonderland, Zedance, Groomig Centre, Janiqu# My friend, Soko Loan, Ncash, 9credit, Gocash, Kashkash, Easycredit, Fastmoney, Xcredit, BorrowNow, amongst others.
One of the documents which read in part noted that “With respect to specific issues observed from the complaint, the Commission identified defamation, abuse of consumer rights to privacy, high compounded interest, unfair business tactics/harassment with respect to debt collection and violations of money lending regulations and framework.”
Mrs. Roselyn Njoku, said She has not known any peace since She borrowed N100,000.00 from Lapo micro finance last year. “Since then, I have paid them over N200,000, and they are claiming I am still owing them. They did not explain compound interest to me. I starve myself and family to make sure I pay back the agreed monthly N10,00O but all my efforts to clear the debt does not seem to yield any result”.
The Seamstress alleged that the officials have repeatedly been to her shop demanding their money harshly even in front of her neighbors and customers. “Sometimes they come here threatening to lock up my shop if I do not pay back a minimum of N20,000 monthly and my question is, what of all the money I have already paid back and their answer is that, it is only the interest I have been servicing.”
Crying for help, “I am at my wits end. I have gone to their office but the manager shouted me down. From my own calculations, I am no more owing them but according to them am still indebted to them to the tune of N35,000.”
Speaking, embittered Ladipo Lafia who is a victim blamed commercial banks for forcing customers to patronize lending houses. He said it was the flaws and loop holes in the policies of commercial banks that the micro finance houses took advantage of.
“Most commercial banks are so stringent with their policies on loans that an average Nigerian or civil servant may find it difficult to meet their conditions. Unlike commercial banks, majority of these lending houses will not demand for collateral before giving you loan. Their loans are easier to access than loans from commercial banks. Majority of the people that approach Micro finance houses are those without collateral”.
Engineer Ladipo who is a teacher with one of the Government Schools in Lagos, said that apart from GTB and First bank, that most commercial banks, do not have programme for civil servants. “At least these two banks can give you salary advance even if it is small. The interest rates of commercial banks are as high as six per cent so why would you not jump up, if a micro finance bank offers an interest rate of 2.6 per cent”.
“The regular commercial banks have failed, that is why loan sharks are thriving. Ordinarily, commercial banks should be able to advance loans to their customers at reasonable interest rates without other attendant stiff conditions,” said Mrs Chikamso Ogbonnaya.
“I do not patronise them but I know two families that borrowed money from a micro finance house. They tried to pay back but as they serviced the loan, instead of it reducing, it kept going up, after months of incessant harassment and intimidation from the Finance house, they fled Lagos. One of them fled with his entire family back to village in Kebbi, while the second man who had a shop at the computer Ikeja, locked up and fled to Cotonou, Benin Republic.
Still yet, another affected customer of Accion MFB, Madam Esther Iwu said though She borrowed N250,000 from the bank she managed to pay it back under much duress. “I borrowed the money in 2019 for a period of six months. The interest on the loan was a whopping 6per cent. I was charged N2,500.00 as administration fee and the same amount for insurance.
“For any delay in repayment, I was charged 1 percent on unpaid installment. At the end of the six months, I paid back a total of N303,589.65. But I would not have done any other thing because I was under great financial pressure.”
Another aggrieved customer, said She borrowed N300,000 from Glaze MFB. “I applied for the loan in May last year and it was approved in August. Initially I was paying as at when due but when my husband lost his job, though I continued paying but I reduced the amount I was paying” said the woman in tears.
“Since August last year when I borrowed that money, I have paid back over N450,000 to them because every month I pay back something even if it is N5,000. However they are still insisting that I still have to pay back N72,000 as I have been servicing the interest.”
“The officials of the bank are busy calling and threatening the contacts on my phone. I have explained my predicament to them but they have turned deaf ears. They have been to my shop to threaten and disgrace me. At the moment, am thinking of locking this shop till I can raise the lump sum of N72,000 but then, they may tell me that the debt has generated more interest.”
Another victim, who asked not to be named, revealed his experience in the hands of BorrowNow.
According to him, he took a loan from BorrowNow and his due date was Monday, October 25th, 2021. He made a payment of N157750 to the Zenith Bank account number as follows: 1214038951 before midnight on Monday but either by default or design he only got the alert on Tuesday, at 7:40 am. “As soon as the alert came, I sent the debit alert to this number: 08085664574, being the contact info for the agent that notified me on Monday. But few minutes later, I received a message from one Blezz C, another one of your agent, who threatened that she’ll send messages to my contacts if I don’t pay up before 12noon. I sent her the debit alert immediately. The next thing, she said was that I was balancing N305. I then told her I made payment before midnight so I don’t know why I have to pay the overdue charge. She called me all manner of unprintable names. I tried calling her afterwards but she wouldn’t take my calls. Thereafter I paid the N305. She later called to say I sent her a fake debit alert and therefore she would send messages to my contacts. She has done so already. The damage has been done. I’m prepared to take my own pound of fresh too. I don’t know how many contacts she sent the messages to. All I want is a retraction and an apology sent to the same contacts otherwise I’m going to take this up with my lawyers as well as make newspaper publication to as many outlets as possible. If I don’t get any positive response within 24hours, then you leave me no option than carrying out my own plans too.”
Using Soko Loan executives as scapegoats
Checks at the National Information Technology Development Agency (NITDA) revealed that the loan app startup, Soko Lending Company Limited (Soko Loan) was fined by the agency recently for privacy invasion.
The NITDA said Soko Loan illegally accessed the contacts of its customers, and send damaging messages to the contacts when their debtors fail to payback loan on due date.
Head, Corporate Affairs and External Relations of NITDA, Hadiza Umar, stated that the agency had investigated Soko Loan following series of complaints received from users of the Nigerian loan app, a statement dated August 17, 2021, revealed.
Upon conclusion of the probe, Umar said NITDA warned Soko Loan against the conduct and tried to work with the company to avoid future occurrences, but Soko Loan continued in its old practice.
“The Agency made strident efforts to get Soko Loan to change the unethical practice but to no avail. After the Agency’s investigation team secured a lien order on one of the company’s accounts by which it could come up with privacy enhancing solutions for its business model, Soko Loan decided to rebrand and direct its customers to pay into its other business accounts.
“The Agency’s investigation further revealed that the company embeds trackers that share data with third parties inside its mobile application without providing users information about it or using the appropriate lawful basis”, NITDA said in a statement dated August 17, 2021.
NITDA said it has fined Soko Loan N10 million, and also directed the loan app to pay for the conduct of a Data Protection Impact Assessment by a NITDA appointed DPCO on its operation.
Aside from the fine, the agency is also considering imprisonment against the executives of Soko Loan, and has sort the assistance of the Police to determine charges for violating Section 17 of the NITDA Act, 2007.
It also directed Soko Loan to desist from accessing phone contacts of users and sending unsolicited messages to the acquired contacts.
Respite for victims
Respite seems to be coming their way soon, as the federal government said it has begun investigations as part of its plans to penalise companies in the money lending industry that are engaging in illegal acts.
This is according to the information contained in a document signed by the Chief Executive Officer of the (FCCPC), Mr Babatunde Irukera, on behalf of the Joint Regulatory and Enforcement Committee in Abuja.
In the statement, the FCCPC, the Central Bank of Nigeria (CBN), and the Economic Financial Crimes Commission (EFCC) announced that they had started an investigation into the money lending business for rights violations.
The committee also has the Independent Corrupt Practices Commission (ICPC) and the National Information Technology Development Agency (NTDA) as members.
According to Mr Irukera, the committee would spearhead efforts to regulate a number of potentially questionable practices by certain money lenders, also known as loan sharks.
‘’The Federal Competition and Consumer Protection Commission on November 10, 2021, hosted a meeting attended by the Chief Executive Officer of the Independent Corrupt Practices Commission (ICPC) and representatives of the National Information Technology Development Agency (NITDA) and the Central Bank of Nigeria (CBN); in leading an effort to address the multiple potentially dubious conduct of certain money lenders, otherwise known as loan sharks.
He also disclosed that the agencies decided to work together, take immediate enforcement action against known violators while investigating others, and pursue criminal prosecutions where appropriate.
What the government can do
According to Waheed Akanni, a fintech expert, “what the government can do is pass a law saying no obligations towards interest count beyond a percentage point. So if somebody is unable to pay the huge 36% to 60% annual interest etc., and it goes legal, the government can say, “This is a shark rate of interest, and your party can claim bankruptcy and is liable only to pay 12%!”