THE failures being witnessed in the digital lending industry in Nigeria are primarily a reflection of the absence of money lender laws that are specific to Digital Money Lenders and also consistent with industry realities.
The Lead Transaction Counsel at Balogun Harold Legal Practitioners, Olubunmi Abayomi-Olukunle, made this observation in a position paper seen by Nigerian Tribune.
According to him, at the time the traditional money lender laws were enacted, the primary regulatory object was to protect consumers from loan sharks.
Today, there are other issues around how the personal data of a consumer is used , the ethics of debt recovery, buy-now-pay-later products, non-cash lending and so on.
These issues need to be regulated as a matter of “interim” priority, he stated.
Abayomi-Olukunle said it is important to also note that, by design, money lender laws enacted by states are primarily consumer protection laws as issues such as the maximum amount of interest rate chargeable are regulated in the interest of consumers across money lender laws.
Nigeria’s consumer protection regulator, the Federal Competition and Consumer Protection Commission (FCCPC) recently published a Limited Interim Regulatory/Registration Framework for Digital Lending (“Regulation”) with the intent to regulate digital money lenders in Nigeria.
This, the lawyer says, is a welcome decision but that a number of legal and industry issues are thrown up.
On the one hand, state governments may also seek to enhance their competitiveness by promoting and legislating relevant digital money lender laws.
“However, it is useful to note that state governments can only regulate digital lending from a consumer protection standpoint, as they do not, in our view, have the constitutional power to regulate money lending from a prudential standpoint.
On August 18, the FCCPC released a statement titled, ‘Further and Continuing Investigation of Rights Violations in the Money Lending Industry; and Release of Interim Regulatory Framework.’
Amongst others, this Framework states that telcos/tech companies should cease from providing server/hosting services or other key services to certain digital money lenders or lenders operating without the FCCPC’s approvals; all payment processing companies should immediately cease from providing payment or transaction services to lenders under investigation and that Google should take down specific applications.
The lawyer said the supremacy clause in the FCCPC Act gives the FCCPC primary and concurrent jurisdiction (with government MDAs) over consumer protection issues in Nigeria.
According to him, the BOFIA Act (which regulates Banks and fintechs) provides that the FCCPC Act shall not apply to any financial product or financial services licensed and regulated by the CBN.
The BOFIA was enacted in 2020 and therefore supersedes the supremacy sections(2) in sections 104, 105, and 106 of the FCCPC Act, which was enacted in 2018.
The BOFIA, according to Abayomi-Olukunle, supersedes the FCCPC Act because of a principle of law for interpreting laws in Nigeria which asserts that the intention of lawmakers when they make a new law where one on the same subject matter exists, is to correct any inconsistencies in a previous law.
For this reason, “There is some doubt that the FCCPC can regulate digital lenders that are licensed by the CBN. More importantly, section 30 of the BOFIA 2020 empowers the governor of the Central Bank to exclusively regulate consumer protection in the financial services sector.
“Evidently, the FCCPC can only possibly regulate digital lenders that are not licensed by the CBN (i.e. unlicensed digital money lenders or digital money lenders using state-issued money lender licence as regulatory cover),” he stated.
Abayomi-Olukunle added, “Accordingly, the legal basis for FCCPC’s request for registration information such as, “source of funds” (and a number of other such requests) from digital lenders, is questionable in our view and ought to be reviewed.”
In the same vein, he said asking digital companies to register with the FCCPC suggests that there is some legal basis for FCCPC to mandate companies in other industries (discos, gencos, telcos, manufacturing companies, oil and gas companies, etc) to register with the FCCPC for purposes of consumer protection.
“This is a difficult proposition to make and is worthy of judicial review,” he said.
YOU SHOULD NOT MISS THESE HEADLINES FROM NIGERIAN TRIBUNE
Insecurity: 5,000 Nigerian Children May Die Of Starvation By October —UN
THE United Nations has raised the alarm that no fewer than 5,000 children in war-ravaged northeastern Nigeria will die of starvation in the next two months unless the world raises the necessary funds for intervention…
My London Meetings With Obasanjo, Tinubu, Atiku, Obi In Nigeria’s Interest —Wike
RIVERS State governor, Nyesom Wike, on Friday said that his London meetings with the presidential candidate of the All Progressives Congress (APC), Senator Bola Tinubu, Labour Party presidential candidate, Peter Obi, the presidential candidate of the Peoples Democratic Party, Alhaji Abubakar Atiku and former President Olusegun Obasanjo were in the interest of the nation…
Bandits Stole My Chickens, Cut Off My Arms —Zamfara Man
A victim of a bandits attack, Ismail Mohammed, has explained how his life took a turn for the worse with the loss of his arms….
and then