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Mobile lenders will unveil hidden fees from September

Mobile lenders will unveil hidden fees from September

By Jane Muia / Posted on Mar 17, 2022 | 3:05 p.m.

KEY POINTS

According to the CBK, the new directive is part of the conditions laid down for the granting of new licenses to digital mobile lenders, which will help to refer cases of loan overpricing and misuse of customer data.

KEY POINTS TO REMEMBER

Digital lenders will now be required to set interest rates on their loans within CBK-approved parameters to protect borrowers from the predatory lending that has pushed many into the debt trap.

The Central Bank of Kenya (CBK) is asking mobile lenders to reveal the total amount of their loans from September. Before extending credit to customers, this will include interest rates, late payments and rollover charges.

According to the CBK, the new directive is part of the conditions laid down for the granting of new licenses to digital mobile lenders, which will help to refer cases of loan overpricing and misuse of customer data.

CBK Governor Patrick Njoroge said the new law would allow customers to benefit from reduced credit service charges.

“We’ve had issues with mobile lenders, and I would like to announce that the law is here and it will streamline the industry. Over-pricing issues of misuse of customer data will be taken care of in the new law which they must comply with by August 2022,” CBK Governor Patrick Njoroge said on Tuesday.

CBK noted that most Kenyans who acquire digital loans are unaware of their rights, so they fall victim to overstated credit limits, leading to massive debt.

The new directive follows the signing of the Central Bank Act 2021 by President Uhuru Kenyatta which brought digital lenders under the supervision of the banking regulator for the first time in December.

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The CBK Law 2021 requires lenders to seek approval from the banking regulator to price their loans and products, subjecting them to the same rules as commercial banks. In addition, the law grants the CBK the power to revoke the authorizations of digital lenders who breach privacy rules while prosecuting violators.

The laws come after customers raised the alarm about being sued by lenders in shameful ways, such as accessing their phone books and notifying friends and families of defaulters via their contact details.

“An applicant must provide the terms and conditions applicable to digital credit and which must be accepted by the borrower before activating a mobile loan account,” specifies the new law.

According to the CBK, failure of lenders to disclose full information on loan facilities to borrowers will result in the suspension of licenses.

Digital lenders will now be required to set interest rates on their loans within CBK-approved parameters to protect borrowers from the predatory lending that has pushed many into the debt trap.

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