In August 2022, the Federal Competition and Consumer Protection Commission issued the Limited Interim Regulatory/Registration framework and guidelines for digital lending 2022. This issuance is in the exercise of the powers conferred upon it by Sections 17, 18 & 163 of the Federal Competition and Consumer Protection Act, 2018 (“the Act”), which states thus:
“The Commission may make and issue guidelines and notices for the effective implementation and operation of the provisions of this Act….”.
You will recall that before this issuance, the FCCPC had been plagued with reports on breach of privacy, unfair business conduct, credit delivery issues, and unethical recovery practices by some digital lending companies, amongst other matters. This article will highlight the Limited Interim Regulatory/Registration framework and guidelines for digital lending in Nigeria.
This Limited Interim Regulatory/Registration framework and guidelines for digital lending 2022 contains the Interim Digital Lending Guideline Form, Explanatory Notes, First Schedule, and a Declaration for Digital Lending Businesses in Nigeria.
The form is to be completed and submitted along with;
I. the Applicant’s certificate of incorporation,
II. description of the Applicant’s business,
III. company’s organogram showing key role players,
IV. Name and address of the person of a person authorized to receive correspondences on behalf of the Company,
V. Evidence of membership in any trade or professional associations,
VI. any service level agreement with service providers.
VII. Evidence of feedback and complaint resolution mechanism,
VIII. Proof of Tax payment or tax waivers
IX. Applicable fees and
X. Declaration for Digital Lending Businesses in Nigeria.
Other notable provisions of the Limited Interim Regulatory/Registration framework and guidelines for digital lending 2022 include:
- Identity of digital lenders
The Guidelines stipulate that every digital Money lender must include the registered name and proper identification for clarity purposes. - Address, Phone numbers
Every digital lender must provide the Company’s address in Nigeria and its address at any other office outside Nigeria where applicable. - Directors and Promoters
The Applicant must provide the identity and nationality of the Directors and promoters of the business. The same must be specified if such directors and key role players are of dual nationality. - Source of Capital
The Commission mandates that digital lenders provide source information on funding, capital injection, debts, nature of the instrument, and whether or not such individual is a Nigerian or a foreign national. The import of this provision is to curb Money laundering. - Affiliates
The Commission maintains that any digital money lender must disclose its direct or indirect affiliates with other companies, institutions, and similar domestic, regional, or global businesses.
Although the requirement is that the digital lender here must make such disclosure, it can be inferred that the Commission requires such affiliates to also comply with the provisions of the Nigerian Data Protection Regulation and any other laws and regulations so that they apply to their business sectors. - Agents and representatives of the business,
Under the framework, applicants must disclose their consultants and agents to the Commission, especially if such consultant assists the Company with its registration process, operation, and management.
Where the representative ceases to act for the Applicant, the Commission must be promptly informed. - Interest rate, steps to calculate and track loans
The Commission prescribes that every digital money lender must provide formulas for the derivations of interest rates and indicate any associated fees with opening and maintaining accounts and penalties for late payment. The import of this provision is that digital lenders can no longer charge arbitrary interest rates, nor can obligors be subject to any hidden charges which have not been disclosed to the Commission. - Associated Apps
If a digital lender introduces new apps, it must notify the Commission. The Commission must also be informed of such changes when the digital lender makes material modifications to its existing apps.
COMMENTS
Although the introduction of the framework by the Commission is novel, commendable, and echoes the saying that “innovation precedes regulation,” the framework is silent on any associated regulator’s cost for this registration.
As more digital lenders comply with these provisions, it is hoped that the Commission will continue to create an inclusive environment that encourages digital lenders to thrive in the economy.
It is also necessary to highlight that the framework specifically caters to digital lenders and does not refer to traditional money lenders who have not digitalized their business processes using technology through applications.
This framework is not quite elaborate compared to India’s new guidelines for digital lending. It does not define who a digital lender is and also does not indicate timelines for immediate implementation of the framework.
It is worthy of note that at the moment, an expose draft on Digital Financial Awareness Guidelines is underway at CBN and would no doubt compliment the framework for digital lending in Nigeria.
By Frances Onukwu and Urechi Ukefi
Disclaimer: Please note that the critical items highlighted above are solely for academic purposes and should not be taken as legal counsel. For further information, kindly email info@zuriel.com.ng or contact our office, Zuriel Law Practice, 14a Dasilva Street, Off Ayo Jagun Street, Lekki Phase 1, Lagos.
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Limited Interim Regulatory/Registration framework and guidelines for digital lending 2022.