Police, CBN kick as microfinance institutions’ agents paste debtors’ obituaries, detain them in toilets

The tales of woe will melt even the hardest of hearts and bring tears to the driest of faces. Traders in Lagos are resorting to self-help which is taking their dignity and humanity away. CHIMA NWOKOJI, OLALEKAN OLABULO, TOLA ADENUBI and TUNDE ADELEKE shared in their grief and the concern of the lenders too.

Fidigbota (grinding pepper with one’s backside) and gb’oyan le lantern (placing one’s breasts on a lit lantern) are two common coinages with market men and women in Lagos State. The phrases are used to capture the psychological, emotional and physical torture they go through trying to profitably manage and repay within allotted periods, short-term loans they regularly source from micro-finance institutions which are springing up all over the state. Unlike in the past when sourcing loans to finance small-scale businesses was like the proverbial camel passing through the eye of the needle, with the tap of a button today, people get small loans in the twinkling of an eye.

Also unlike in the past, such loans, when successfully processed with the conventional bankers, with collaterals, borrowers rarely default except there are genuine circumstances beyond their control. Such transactions today are completely different. Borrowers get loans without collateral, almost at the snap of fingers and the ease with which the loans come is said to be responsible for the high increase in default with many borrowers reportedly picking the loans with the intention not to pay back.

For instance, a young man could apply for a loan to improve his business but as soon as he receives alert, he remembers that one can risk part of it on sport betting in order to multiply the money before using it for its original purpose.

All these changing situations and attitudes are not without a cost. Like Chinua Achebe wrote in his celebrated novel ‘Things Fall Apart’, “Eneke the bird says that since men have learned to shoot without missing, he has learned to fly without perching.” As borrowers’ attitudes are changing, lenders are daily learning to adapt to new situations.

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New world, new order

Welcome to the new world of lenders and borrowers where any method can be applied to recover money from the latter. For business owners in Lagos, the difficulties they usually encounter in an attempt to borrow money from conventional banks have driven them to the emerging new institutions that have simplified lending and borrowing of funds with lower interest rates.

Financial technology companies are also disrupting the lending industry with quick, easy and cheap loans without collateral offering loans on USSD platform. Their loans range from N1,000 to N200,000, depending on capacity and ability to pay back after assessment.

Mr Keinde Daniels, a victim of loan recovery agents told Saturday Tribune that this group of lenders does not give one space once there is a default of one day. First, they will call, send emails and visit the address provided by the borrower to drop a letter threatening to drag the borrower to court if he or she does not open the channel of communication on how to pay back.

“But if you answer them, you can agree on how to restructure the payment. If you fail to respond to the calls, you will be taken to court and forced to pay for legal services for yourself and that of the lending institution,” Daniels explained.

Those in the more-established category have offices and are known as microfinance banks. There are about 882 microfinance banks scattered all over the country. However, despite the laudable efforts of these sets of new financial institutions, with some operating online with no physical office, their means of recovering the borrowed funds have been likened to the biblical Armageddon.

One of such institutions thriving in many market areas in Lagos is a savings and loans company (name withheld) which aims to assist small and medium scale business owners in getting capital for the sustenance of their businesses.

Pattern of lending

At the company, the pattern of lending is in a quadruple format. In-between the lending institution and the borrower is a credit officer (CO) and a guarantor. Before the company gives out funds to small business owners, it advises that they form a group and there must be a guarantor who stands for the individual borrower. The guarantor, as the name implies, gives assurances that the borrower will refund accordingly and not default at any stage.

After getting a guarantor that can stand on his or her behalf, the borrower is taken to a credit officer who interviews both the guarantor and the borrower to be sure there won’t be any defaulting during the repayment process. The CO is the representative of the lending institution in the community. He or she takes both the guarantor and the borrower to one of the meetings of the company’s representatives which holds once every week, and collects the fund which is then given to the borrower in the presence of the guarantor.

COs are usually borrowers who have been involved in the lending business for a considerable length of time with the said savings and loans company and have never defaulted. After some years of active lending and no default, a borrower is then appointed as a CO by the companny to help it coordinate a particular area. The borrowers could access N60,000, N150,000, N300,000 or more.

The membership agreement form costs N500. Although, the wordings of the form do not include any clause suggesting that unlawful actions can be taken to recover loans, Saturday Tribune obtained a copy to understand the binding agreement which has seen many defaulters subjected to excruciating ordeal at the hands of representatives of the lending company and others.

According to the agreement form, a borrower must sign an oath to the following before being registered as a member and allowed to borrow money from the company: “That I am ready to abide by all the rules and regulations guiding the union; That I will be paying my installments as at when due; That I shall be paying my mandatory savings regularly; That I shall attend meetings regularly unless permission has been given to me to go to the market or to attend to urgent matters by the leader, secretary or CO; That I shall not withdraw my mandatory saving until I have offset my loan and intend to quit the organization; That the organization should take any legal action against me if I failed to abide by the above agreement.”

Defaulters’ agony

For many defaulters, it has been a tale of pain, humiliation and public disgrace at the hands of their COs or guarantors. A borrower who defaulted and was publicly disgraced told Saturday Tribune that she was locked up in a public toilet. She said the public shame forced her to relocate from her neighbourhood. The trader, who would not reveal her identity to Saturday Tribune due to the shame, said: “My CO in company with my guarantor came to my shop with policemen and took me to our local office where I was locked up in the toilet. I couldn’t pay because I had to divert some of the money to pay my children’s school fees.”

Aside from detention in the toilet, COs and guarantors also publicly disgrace chronic defaulters by pouring water on them while walking them on the streets and subjecting them to ridicule.

However, further investigations revealed that the company does not get involved in this public disgrace of defaulters. Also, on a visit to the company’s head office, it was discovered that there are no policemen guarding it. Instead, the lender engaged the services of civilian security personnel.

Mr Kolade Ashafa also narrated his ordeal at the hands of an online credit advancement firm. He said he had done business with the firm about six consecutive times and didn’t default for once and yet he was embarrassed. According to him, his loan was due for payment on Monday, 28 October, 2019. “Then I received a call from the company’s personnel who asked when I was to make repayment. I told him that I intended to pay on the same day as soon as I got the money I was expecting. I also took time to explain that my repayment plans were too short and expensive, to which he said the organisation had looked into such matters and that subsequent loan would be better. Unfortunately, I could not get the money expected and could not pay as promised.”

Mr Ashafa was off his desk in the office to join his team for a brief meeting with the managing director. On getting back, he said he realised that he had already missed several calls with one of the callers backing the missed calls up with a text message. The message in block letters reads: “Pls make your payment or else you will be blacklisted, after which your BVN will be blocked and your profile handed to the legal team. Hence, you won’t be able to make any financial transactions if you don’t make payment. Management.”

Ashafa said he felt so embarrassed and threatened, coming from a company he had done business with on several occasions. When he called back to ask why he had to get such a message without the benefit of the doubt, despite long association, the company’s personnel just dropped the call on him. Ashafa said he called again several times and the man kept dropping his call.

Surprisingly, he explained that these companies have an application that give them access to borrowers’ contacts. So, they just picked random contacts based on frequent calls and start reporting their customers to those contacts.

One of such messages that was reported to a correspondent of Saturday Tribune reads: “Please help Inform KOLADE RAHMAN ASHAFA OF 08028299**** to make His loan repayment as he has been avoiding our calls and acting fraudulently. He might be blacklisted and arrested for this…”

According to Mr Ashafa, “I asked him if he wanted me to call HR to report his attitude, he shouted, ‘Go Ahead’ and dropped the call on me again. Minutes later, someone on my contact called me again that she received a message from the company with similar message as was sent to Saturday Tribune reporter.”

The embittered Ashafa further narrated how he decided to call the last agent that attended to him before the new transaction. According to Ashafa, he sent a letter of complaint to the company since Monday but till the end of the week, nothing was heard from them.

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Extreme measures

In the words of a CO who refused to have her name in print, the lending company she works for “will only ask us (COs) about the refund of the loans under our areas of jurisdiction, but how we get them is not the company’s business. In some cases, the borrower runs away or disappears into thin air, leaving the guarantor to face the reality of refunding the money on their behalf. “If we cannot find the borrower, we deal with the guarantor and make them pay back the money which they have stood for. How we get the money is none of company’s business. Public disgrace is only meted out to chronic defaulters,” she said.

Although the CO exonerated the company, Saturday Tribune’s checks revealed that the Central Bank of Nigeria Consumer Protection guideline stipulates that “The financial institution is liable for the actions of their agents engaged for the purpose of debt collection and must not pass the cost of engaging debt recovery agents to customers.”

When Saturday Tribune visited the lending company’s headquarters located somewhere in the Iyana Ejigbo area, two of the company’s lawyers who received our correspondent requested that the appointment be rescheduled as the personnel who acts as the company’s spokesman wasn’t available to attend to our correspondent’s enquiry. On a return visit, the personnel claimed that his firm did not indulge in any form of intimidation in dealing with clients and had never received any of such reports from its branches across Nigeria.

“As a matter of fact, it is a surprise to me that this is associated to our company, considering the measures we have put in place,” he said. Although official maintained that company had lived on the philosophy of “do no harm,” Jumoke Adebisi’s case might be another interesting experience.

Adebisi took a loan from the company, the same lending outfit that dispenses short-term loans for petty traders. When she could not meet up with her repayment plan, a team of young ladies visited her house twice. On both occasions, they did not disclose their mission. When it appeared to them that Adebisi was playing games, they opened up. But acting on a tip, it would appear they swooped on her during the third visit. In full public glare, they abused her, threatening to paste her obituary if she failed to honour her pledge of paying up her debt.

While one may be tempted to dismiss the threat as empty, Saturday Tribune investigations revealed that the lenders actually apply these measures when people default. These measures, it was gathered, include confiscation of wares, seizure of household items and arrest of defaulters. In extreme cases, defaulters are publicly disgraced with sachets of water thrown at them and posters pasted announcing their obituaries.

Asked what obituary posters would achieve, a source replied rhetorically, “who wants his obituary pasted consistently the way the lenders do? Is it a good thing? Somebody who is not dead and his obituary is seen everywhere. Then those who are ignorant of the development will see the person one day and start running.”

The case of Adaobi Chukwu is that of another financial institution but sources privy to the institution did not want it mentioned in print. When Chukwu got introduced to the micro-credit schemes of the lending institution, little did she know that she was embarking on a venture that might abruptly end her almost three decades of sojourn in Lagos, Nigeria’s commercial nerve-centre and former capital.

Chukwu, a middle-aged trader and mother of three, started as a petty trader. Fortune smiled on her when her business which consisted of household items and stationery received a boost through huge patronage from people and students in her Ipaja neighbourhood, a Lagos suburb. She was able to support her family and pay the fees of the children who were in nursery and primary schools. Things, however, gradually began to go down for her after she got her first child into a state university in one of the south-western states which fees, appeared a bit exorbitant.

Chukwu’s effort to secure assistance from friends and neighbours in a bid to see her daughter through the university yielded poor results. Yet, determined she was. That was the situation when a friend of hers encouraged her to approach one of the lending institutions and assured her of getting loans to boost her trade if she could have a guarantor.

To her, this was not supposed to be an uphill task since she already had a shop, a major condition to be fulfilled to access the loan. She got introduced by the friend, and she secured the first tranche of loan. She then was able to pay her children’s fees and feed her family without stress. Her daughter graduated recently and she’s presently serving the nation in one of the south-eastern states.

Not long after the girl’s graduation, the mother’s physique started changing.  She was emaciating by the day. This development worried her neighbours and well-wishers who enquired without success what the problem was. The bubble eventually burst in early August when news filtered in that her lenders were on her neck demanding that she clear her indebtedness. Without giving anybody any sign of suspicion that she was about to run away, she disappeared at dawn with her shop under a strong lock.

Chukwu’s neighbours did not get to know until the lenders surfaced to narrate their own side of the story. The lenders, apparently outsmarted by Chukwu, put a counter lock on her shop and left. The guarantor, now under intense pressure had to approach Chukwu’s husband for information about his wife’s whereabouts. Sensing trouble, the husband and the remaining two children also bolted to only-God-knows-where. The only items the guarantor could access were just empty crates of soft drinks, which amounted to nothing, compared to the her debt profile of close to N500,000.

Lenders defended

In the words of a trader who identified herself simply as Iya Basiratu, the loans she collected from the savings and loans company helped her business to grow significantly. “I have been collecting the company’s loans for some time now and I have never defaulted. I have been able to expand my business through the loans and I have been diligently paying back my loans without defaulting,” Iya Basiratu said.

When asked how she had been able to service her loans while many people were defaulting and running away, she explained that many defaults were because the loans collected were usually used for something different from what the money was meant for. “Many traders default because the moment they collect the money, they divert it to other purposes. The moment the money is diverted to other uses, to recover the funds becomes difficult and that is why many run away, leaving their guarantors to face the consequences of their action,” the trader operating at the Toll Gate market in-between Lagos and Ogun states stated.

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A lending company responds

The Head, Executive Support, of one of the companies, told Saturday Tribune that the likelihood of anyone from the company maltreating a customer, whether on default list or not, was very low because “as you know, Grooming Centre is the first microfinance institution in Nigeria to receive the Smart Campaigns Client Protection Principles Certification.”

According to him, the promoters of this global certification consider seven criteria before awarding it. “They check how well the products are designed in terms of the channels with which we sell the products; how we help customers to avoid over indebtedness; transparency; respectful treatment of clients; responsible pricing; privacy of information like protection of clients data; what are mechanisms for feedback and grievance resolutions,” he explained.

He also explained that there is a guarantor that guarantees every loan and if the borrower defaults and is nowhere to be found, the credit officer contacts the guarantor. The guarantors, in most cases, according to him, pay back the loan. But where they fail to pay, “we involve the law enforcement agencies and if the police feel that it is something we should carry on as a civil matter, then they charge it to court as the last resort. But this is very minimal. We have already put in place measures to ensure that there is nothing we do that harms our clients. In our staff code of conduct, it is clearly stated that harassment is not allowed, so the company has zero tolerance in its sanction metrics with appropriate debt collection practice. We cannot name and shame. We cannot expose our clients unnecessarily to the public or physically harass customers. We ought to have heard this if it actually happened because we have many channels of complaint. The most direct one is the company’s toll-free line through which the client can call and lay complain free of charge and we receive calls,” he told Saturday Tribune.

He also said that the company makes a minimum of 200 calls a week to clients as a way of monitoring what they do and how they are being treated. The toll- free line, according to him, is on their passbook and leaflets. “We also have suggestion boxes at the branch level where we receive feedback from the public. In the light of all these, it is unlikely that Grooming Centre will have clients that are being intimidated,” he stated, adding: “It does not pay to maltreat my client because if I do, other people will hear about it and that robs off on corporate goodwill. It makes more sense for me to treat you well and then by word of mouth, you can refer other people to the centre.”

Go to court if lenders violate your right –CBN

When contacted, the CBN’s Director of Corporate Communications, Mr Isaac Okorafor, told Saturday Tribune that the contract between a bank and its customer did not involve CBN but the parties concerned. He added that each of them had rights to sue and be sued and so any party that is treated unlawfully can go to court.

“The law guiding loan repayment specifies that the borrower must ascertain whether the repayment schedule proposed by the bank is convenient to it and its line of business. We are neither a human rights body nor the police. The contractual relationship between a customer and his bank is exclusive of CBN’s role, therefore, any debtor who feels his or her rights have been violated can seek redress in the law courts,” he explained.

Also, a top executive at the apex bank who preferred anonymity because she was not authorised to speak said the regulator (CBN) has repeatedly warned the general public against patronising unlicensed and illegal financial institutions. This is because such institutions could equally use unlawful means to recover their money. According to her, all CBN licensed lenders are guided by the Banks and Other Financial Institutions Act as amended) and they are on CBN’s website.

“There is a guideline on Responsible Business Conduct, contained in the Consumer Protection Framework (CPF) for institutions regulated by the CBN, and the document is in public domain,” she said.

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What the protection guidelines say

The guidelines provide minimum standards of business required of financial institutions under the regulatory purview of the CBN to protect the rights of consumers and to hold the institutions accountable as a result of the skewed power imbalance.

Under the CBN’s consumer protection guidelines, lenders are required to: ensure that debt recovery processes are courteous and fair, devoid of undue pressure, intimidation, harassment, humiliation or threat.

Among other provisions, the set rule also provides that financial institutions shall: “Inform customers of the debt recovery procedures in loan contracts; proactively engage and give customers early notice of outstanding obligations prior to the commencement of debt collection process.”

Saturday Tribune checks revealed that in the case of a loan with collateral, the lender must give customers a minimum period of six months from the date of notice of sale of the property used as collateral, the option of a private sale before commencing the sale, except where the customer waives the right.

Lenders must not make telephone or personal contact with customers between the hours of 8.00pm and 8.00am for the purpose of debt recovery (unless with prior consent of the customer).

“Failure to comply with the provisions of the Guidelines shall attract regulatory sanctions provided for by the CBN Act, the BOFIA, other laws and regulations,” the CPF guideline stipulated.

On responsible lending, the CBN expects the lender to ensure that consumers’ capability to repay credits is efficiently assessed.

It stated that financial institutions must: assess the capability of customers to repay a credit in a sustainable manner taking into consideration the customers’ financial circumstances; set clear policies and procedures on consumer loans to ensure that customers who are unable to meet their repayment obligations due to ill-health, unemployment or other disabilities, are treated fairly and with due consideration; As part of their regular monitoring of loan performance and upon early detection of signs of repayment difficulties, inform consumers of the importance of timely engagement with the Financial Institutions to discuss alternative repayment measures; make reasonable efforts to offer an alternative repayment plan that is appropriate to the customer’s changed circumstances and financial situation and ensure that guarantors read and understand the full nature of their commitment, potential implication of their decisions and the maximum amount they are guaranteeing.

It is unacceptable, unlawful –Police

The police in Lagos State condemned the intimidation, assault and harassment of loan defaulters by micro finance institutions.

The image maker in charge of the state police command, Bala Elkana, told Saturday Tribune that “such a treatment is unacceptable and unlawful.” He also denied being aware of such treatment by any financial institution but urged victims to report to the police.

“I am not aware of any of such treatments but my advice is that whoever is treated in such a way should report to the police with facts. It is then that the police can come in and investigate and prosecute, where necessary,” Elkana said.

He said he was not aware of any incident where a policeman was used to carry out such illegal arrests. “Anyone who has been harassed by any policeman should report with evidence,” he challenged the public.

It is serious offence pasting obituaries of living defaulters –Falana

Leading rights campaigner and Senior Advocate of Nigeria, Mr Femi Falana, fumed when Saturday Tribune sought his opinion. “It is a serious offence pasting the obituary of a living person simply because he or she defaults in loan repayment. If we can get a victim and such obituary posters, we will make a scapegoat of such a microfinance house. Harassing or detaining debtors is also against the anti-torture law. Those involved should also make formal report to the police. The microfinance houses can’t do that (humiliating their debtors).”

Nigerian Tribune