Digital lenders under investigation for sharing defaulter data

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Economy

Digital lenders under investigation for sharing defaulter data


Data Protection Commissioner, Kenya Immaculate Kassait. PHOTO FILE | NMG

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Summary

  • Kenya’s data regulator is investigating an undisclosed number of digital lenders for sharing confidential borrower data in pursuit of defaulters.
  • Data Protection Commissioner Immaculee Kassait has revealed investigations following complaints about digital lenders who violated the confidentiality of personal information.
  • Companies are accused of using “debt shaming” tactics to collect loans.

Kenya’s data regulator is investigating an undisclosed number of digital lenders for sharing confidential borrower data in pursuit of defaulters.

Data Protection Commissioner Immaculee Kassait has revealed investigations following complaints about digital lenders who violated the confidentiality of personal information.

Companies are accused of using “debt shaming” tactics to collect loans.

This includes the use of debt collectors pursuing borrowers either by informing their friends and family using contact information retrieved from their phones, or by threatening them to tell their employers.

Data protection law prohibits the sharing of data with third parties without consent and gives individuals the right to be informed when their data is being shared and for what purposes.

“The Office has received complaints from affected individuals regarding digital money loan applications. To this end, my office has opened investigations into a total of 67 such complaints, in accordance with the office’s mandate, ”Ms. Kassait said without disclosing further information.

The Business Daily could not immediately establish with the data regulator the identity of the digital lenders under investigation.

Dozens of unregulated micro-lenders have invested in the Kenyan credit market in response to the growing demand for quick loans, where borrowers can get loans in minutes via their mobile phones.

Borrowers share personal information, including their occupations and monthly income, when registering with digital lenders.

But besides chasing unpaid loans, digital lenders share personal information with companies for data analysis and marketing purposes.

The Central Bank of Kenya (CBK) has previously raised concerns about the misuse of borrowers’ personal data and called on lawmakers to speed up legislation to provide for regulation of digital lenders.

Lobbies that petitioned parliament when considering the bill also said loan applications are private matters and should be treated as confidential information.

Digital lenders have imposed high interest rates on borrowers, which increase by up to 520% ​​when annualized, leading to an increase in defaults and an ever-increasing number of defaults.

Data protection law further obliges companies to disclose to individuals and customers the reasons for their data collection and to ensure that confidential information is safe from breach by unauthorized parties.

Violations of data protection law result in a fine of up to 5 million shillings and / or imprisonment not exceeding 10 years or both.

“Violation of the provisions of the Kenya Data Protection Act (DPA) will result in a penalty not exceeding 5 million shillings or, in the case of a company, not more than 1% of its annual turnover of the previous year, whichever is lower. , specifies the law.

“Individuals will be liable to a fine not exceeding three million shillings or imprisonment not exceeding ten years, or both.” “

Dozens of unregulated micro-lenders have invested in the Kenyan credit market in response to the growing demand for quick loans, where borrowers can get loans in minutes via their mobile phones.


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