FintechNGR offers to mediate between FCCPC and digital lenders – TechEconomy Nigeria

The recent directive from the Federal Competition and Consumer Protection Commission (FCCPC) to all payment systems operating (in Nigeria) including Flutterwave, Opay, Paystack and Monify to cease providing payment services to lending applications, caught the attention of the Fintech Association of Nigeria (FintechNGR).

FintechNGR, which fosters an ecosystem that supports all stakeholders to achieve a thriving and growing Nigerian FinTech industry, offered to mediate between the Commission and digital lenders.

Ade Bajomo, President, FintechNGR (Photo by: Kelechi Amadi-Obi)

The intervention comes as industry watchers suggest that ‘shock regulation‘ will be counterproductive and send chills down the spine of investors in the sector.

Records show that Fintechs were responsible for 28% of FDI in Nigeria in 2021. They accounted for $1.3 billion of the $4.8 billion in FDI recorded during the year and have the capacity to make $10 billion a year.

Furthermore, there has been rapid adoption of mobile technologies in the region with strong economic growth over the past 2 decades. According to GSMA statistics, the adoption of 4G mobile broadband technology will overtake 2G in 2023 and the total number of unique subscribers in Sub-Saharan Africa will reach 600 million by 2025, representing half of the population of the region.

Therefore, advancements in ICTs offer unique opportunities to fill gaps in the financial sector in Africa, as almost 70% of the African population does not have a bank account.

The problems:

FCCPC recently opened an investigation into the activities of certain digital lenders. The Commission said its investigations revealed that the apps listed – Maxi Credit, Here4U, ChaCha and SoftPay, were all under investigation for unethical practices and breaches of consumer privacy.

More specifically, he mentioned Soko Loan as the company behind several other apps used to circumvent the Commission’s efforts to ensure privacy.

Babatunde Irukera, the Executive Vice President of the FCCPC, said: “The information available to the Commission demonstrates that Soko Lending appears to be the largest digital money lender with multiple apps and brand names covering a significant portion of the market for digital money. digital/online loans. , and one of the most prolific players in violating consumer privacy, fair lending terms, and ethical loan repayment and collection practices.

FCCPC, NITDA, ICPC raid online lending applications
FCCPC Chairman and CEO Babatunde Irukera leading a team consisting of FCCPC, NITDA and ICPC in a raid on the digital lending app operators in Lagos recently.

“The commission ordered all operating payment systems, including Flutterwave, Opay, Paystack and Monify, to immediately cease providing payment or transaction services to lenders under investigation or not operating. otherwise with applicable regulatory approvals.

Last year, the FCCPC rallied sister agencies such as the Nigeria Police Force and the National Information Technology Development Agency (NITDA) to crack down on some digital lenders following allegations of misconduct and contrary actions. privacy of their customers.

On August 26, 2022, the Commission issued new orders as well as an interim regulatory/registration framework and guidelines for digital lending, 2022, as a first intermediate step towards establishing a clear regulatory framework. Digital lending platforms must immediately comply with the guidelines.

Chinonye Nnaji, legal expert in banking and financial law, in an article entitled Consumer Protection Policy for Customers of Digital Lending Platforms in Nigeria; Battle of Regulations’, observed that there has been a massive development of online lending platforms in Nigeria which has increased access and ease of finance.

Consumer Protection Policy for Customers of Digital Lending Platforms in Nigeria
Chinonye Nnaji, jurist expert in banking and financial law.

She acknowledged that the requirements for obtaining loans from these online platforms are less daunting than those from traditional institutions, nevertheless, this influx has resulted in acute practices that violate consumer protection policies that have been heightened in recent years, such as data protection and privacy as well as fair lending and collection practices.

Nnaji, however, referred to the letter from the Association of Nigerian Fintech Lawyers to the Commission which specifically noted that the FCCPC “acts beyond its regulatory powers and requested that stakeholder engagement be carried out in full. emergency “.

“A major topic of discussion is that the Commission’s actions amount to regulating moneylenders who are providers of financial services.

“The FCCPC has also issued an order to payment processors like Flutterwave and Paystack, which are also financial services providers and directed them to stop processing listed lenders.

“The contention is that the Central Bank of Nigeria is the agency with the power to regulate payment processors and not the Commission,” she repeated.

Why FintechNGR wants to step in

Dr. Babatunde Oghenobruche Obrimah, Chief Operating Officer of FintechNGR, said the Association recognizes the FCCPC’s concerns that the business model of some digital lenders needs to be reviewed to reflect a modest approach that protects consumer privacy and in tandem with existing laws/regulations.

COO FintechNGR, Obrimah
Dr. Babatunde Obrimah, COO, FintechNGR

He told TechEconomy, however, that the FCCPC and other regulatory institutions shouldn’t throw the baby out with the bathwater.

Dr Obrimah argued that with $4.65 billion in disclosed funding received by African startups, as available statistics show, with over $1.37 billion of that amount coming to Nigeria and fintechs in the occupying country a whopping 73%, indeed industry players deserve government support.

He said dialogue should not be ruled out to ensure that many opportunities to be leveraged to achieve unprecedented transformation in the fintech landscape are not overlooked.

In his words: “FintechNGR, as part of its advocacy goals, has offered to arrange a meeting between the FCCPC and digital lenders and is only waiting for the regulator to agree on a date.

“FintechNGR believes that engagement is better for the ecosystem and gives investors more confidence in the face of shocks from regulators, especially in a situation like this where the FCCPC’s action raises legal questions of jurisdiction.”

Industry players are also expecting the Central Bank of Nigeria (CBN) to give its position to help clarify the situation involving the FCCPC and some digital lenders.

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