The Central Bank of Kenya Officially Publishes Regulations to Protect Consumers from Digital Lenders

The new regulations that providers will be expected to prove compliance with address licensing, governance, and lending practices. As well, they focus on consumer protection and AML/CFT guidelines.

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A few days after Kenya Central Bank Governor Patrick Njoroge revealed that digital lenders in Kenya are required to seek new licenses, the bank has officially published regulations over digital lenders operating in Kenya.

In a press release, the Central Bank also indicated that it was commencing regulation of digital lenders as it requires them to apply for new licenses by September 17, 2022 or cease operations.

According to the bank, following concerns from the public about poor practices from digital lenders, a Kenya government process gave the apex bank new powers which came into effect on December 23, 2021.

Some of the practices that irked Kenyans include:

  • High Cost
  • Abuse of personal information
  • Unethical Debt Collection Practices

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SEE ALSO: We Will Work Hand-in-Hand with Central Bank of Kenya on its CBDC Rollout, Confirms CEO, M-PESA

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In one of the more harrowing habits, Kenyans have complained of some lending apps using their phone contacts to reach out to friends and family with the apps asking a defaulter’s contacts to remind him or her to pay his loans.

It is such habits that was the focus of regulations.

The new regulations that providers will be expected to prove compliance with address licensing, governance, and lending practices. As well, they focus on consumer protection and AML/CFT guidelines.

Here is a list of CBK’s new expectations:

  • Lenders will not use obscene or profane language with the customer or the customer’s contacts for purposes of shaming them
  • Lenders will not use threat, violence, or other means to harm a customer, or his reputation or property if they do not settle their loans.
  • Lenders are barred from posting a customer’s personal or sensitive information online or on any other forum or medium for purposes of shaming them.
  • They will not engage in any other conduct whose consequence is to harass, oppress, or abuse any person in connection with the collection of a debt.

Failure to comply with this regulation will incur a monetary penalty on a digital credit provider in an amount not exceeding Sh500,000 which is about $4372.

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RECOMMENDED READING: Kenya Fintech Law Takes Effect – Regulations Expected in March 2022 by the Central Bank of Kenya

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