CBK stops digital lenders from calling customer contacts in debt collection

File image of the Central Bank of Kenya (CBK).
File image of the Central Bank of Kenya (CBK).

Digital lenders will no longer send unauthorized and unsolicited calls or messages to a customer's contact person in search of debt recovery.

This is part of new draft regulations issued by the Central Bank of Kenya (CBK) on Thursday, where, following a change in law, previously unregulated lenders began to rein in their operations.

The 2021 CBK (Digital Credit Providers) Regulations, subject to input from stakeholders through January 21, prevent digital lenders from threatening borrowers when taking back loans.

Regulations also prohibit the use of obscene language, inappropriate debt collection tactics, and other conduct that results in harassing, coercing or abusing individuals in connection with the collection of a debt.

In addition, the CBK is set to limit the recoverable interest on non-performing loans (NPLs).

For example, the maximum amount of interest that can be collected from the customer after a default should not exceed the principal owed when the loan is delayed.

Additionally, CBK will require digital lenders to clearly explain the terms and conditions of the loan to the borrower, including the charges and fees, the interest rate applicable, the total cost of the loan, the dates all fees will be paid, and the customer complaint. processing procedures.

Digital lenders will still be allowed to list negative credit information on borrowers with Credit Reference Bureaus (CRBs), but must notify borrowers at least 30 days in advance of the planned listing.

However, digital lenders will not submit negative credit information of a customer whose credit information does not exceed one thousand shillings.

CBK has required all non-regulated digital lenders to provide their business details by January 21, 2022.

Lenders will have six months from the publication of final regulations to apply for licenses to the CBK.

Resellers will receive licenses within 60 days of application, while CBK will certify Directors and CEOs (CEOs) to Digital lenders.

The new draft regulations are supported by the Central Bank of Kenya (Amendment) Act 2021, which covers digital lenders under CBK regulations.

CBK has previously tapped digital lenders to make Kenyans suffer by issuing fast but expensive loans combined with brutal debt collection terms.

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