Digital Lenders to Give Notice Before CRB Listing

Digital lenders will from September 18 be required to give loan defaulters a one month’s notice, before submitting their names to the Credit Reference Bureaus (CRB). This follows new regulations from the Central Bank of Kenya (CBK) that prevent lenders from listing defaulters without their knowledge.

“A digital credit provider who intends to furnish negative information to a bureau with respect to a customer shall, in writing or through electronic means, notify the customer of the intention to submit the negative information at least 30 days before submitting the negative information to the bureau,” read the regulations.

Digital lenders were first ordered to stop listing defaulters in April last year, in response to reports of widespread abuse of the credit information sharing system. The lenders, who include those issuing credit through mobile phones and internet, were accused of using aggressive tactics including threatening borrowers with negative listings.

A negative listing makes it nearly impossible for one to acquire a loan from another credit provider, serving as deterrence against default.

Changes to the CBK Act brought digital lenders under the control of CBK, which allowed them to share borrower’s data with the CRBs. The CBK will however supervise their use of credit information sharing similar to banks, SACCOs and other entities using the system.

Digital lenders will now set interest rates for their loans in parameters that are approved by the CBK, in order to protect borrowers against predatory lending that pushes them into a debt trap.

Previously, there were reports of debt collection agents pursuing borrowers through their friends and family, using contact information collected from the borrower’s phones. Some lenders would go to the extent of threatening to tell the borrower’s employers.

Digital lenders have until September 18 to comply with the requirements and get operating licences from the CBK.