The Nigerian fintech space is growing exponentially, attracting the attention of both foreign and local investors and drawing new entrants into the diverse sub-sectors within the ecosystem. A good number of them have struck gold offering uncollateralized loan facilities to Nigerians albeit at eye-popping interest rates. Of this cohort, it would appear as if some have met and agreed to come down hard on defaulters, resorting to unbelievably desperate measures to recover loan facilities obtained from their apps.
Findings made by Nairametrics show that a number of these loan app operators now send embarrassing short messages service (SMS) and WhatsApp messages to the close contacts of their loan defaulters with the intention of shaming the defaulters, tagging them with terms like ‘criminal,’ ‘fraudster,’ and ‘terrible debtor’ among others.
In some cases, the full names, phone numbers and pictures of the alleged loan defaulters are shared with their contacts like religious leaders, members of churches and mosques, close friends, bosses, colleagues and family members.
To Adewunmi’s surprise, his Pastor called him three days after he had repaid the loan and requested to see him urgently on a Friday evening.
“He called me into his house asking me questions on why I obtained a loan from a company and refused to pay as at when due. I was blank for some minutes before I told him I had repaid the fintech firm,” Adewunmi narrated.
“That is not true,” the pastor responded. “A member of the church and the Head of Department of the Prayer Champions called me this evening that the bank sent the same message to them calling you a fraudster and a cheat,” he said.
Adewumi recalls being flabbergasted at what his pastor narrated. “I showed him the proof of my payment and the response I got from the firm as an acknowledgement before he believed me. From that day, I made up my mind never to obtain a loan from any fintech firm again,” he stated painfully.
The SMS Sokoloan sent to Adewunmi’s contacts read:
“This is to inform the general public that Mr Adewunmi *** with telephone *** is a chronic debtor and a fraudster. He is on the run after duping a lending money company. You are advised to stay clear from him.”
Stella is another victim of the menace. In her case, she defaulted on a loan facility obtained from another fintech firm in Ibadan for one month in October 2020. According to the former staff of one of the local airlines in the country, she could not pay up because she lost her job a month before repayment was due.
“I had planned to refund the credit facility but when the unexpected happened, all my plans went south. I reached out to a designated staff of the loan app operator and pleaded for an extension of three months, to which the staff agreed.
“But I was shocked a week later when a friend I have not seen for five years called me, asking questions about my welfare and whether I was affected by the lockdown. I didn’t suspect anything until he told me he got a WhatsApp message from the fintech, alerting him to avoid doing business with me that I am a loan defaulter.
“When he forwarded the message to me, I knew it that I had passed my bounds and decided never to do that again. My friend sent the money to me and I repaid the loan. Obviously, the plan was to embarrass and disgrace me, so I would go to any extent to repay them. But what if I fell into depression and lost my sanity, how would that have made the fintech any better?” she recounted.
Another victim, Adeolu (name changed) recounted his experience to Nairametrics. In his case, he had obtained a loan of less than N30,000 with an interest of nearly 25% for a 15-day period. The repayment was due on a Wednesday and a staff of Kash Kash, the loan firm, called him to notify him that repayment was due.
Adeolu informed the staff that his invoices to clients were being delayed and requested that the fintech firm give him until Friday, which was the last day of the month, to repay. The staff agreed. The very next day, another staff of the firm put a call through to his wife, a lawyer, threatening her that the company was going to involve the police in the matter.
“My wife was embarrassed, especially since I had not told her of the loan. She asked about the amount and the repayment date. When she realised that the loan was overdue by less than 24 hours, she went berserk and gave the staff a dress-down. She also threatened to report their illegal action in contacting her to NITDA.
“The staff immediately became docile and explained that I had asked to be given until Friday to repay the loan. My wife assured her that there would be no further extension to the loan and the company backed off. Apparently, they are afraid of the regulators but they take advantage of the fact that most people are ignorant of the existence of NITDA and even the oversight functions of the CBN in regulating the activities of these fintechs.
“These agencies need to do more to help Nigerians know that they exist and are functional,” Adeolu said.
A Nairametrics analyst also shared his experience when a strange number sent a WhatsApp message to him (with a picture) that one Ms Damilola had defaulted in paying a loan obtained from the app.
The message read thus:
“FINAL WARNING!!! Good day, be informed Ms Damilola with phone number 081303xxxxx Is a defaulter who took LOAN and has vehemently refused to pay. Hence her actions has proven to be SUSPICIOUS. Kindly reach her and compel her to pay up her loan as the company is taking unfriendly & drastic measures including reporting her debt to CREDIT BUREAU as this is an ALLEGEDLY FRAUDULENT ACT. NOTE: You are getting this message because she gave us your number as EMERGENCY CONTACT.”
The shocking news here is that our analyst does not know the lady in question and the name of the fintech was not mentioned either.
According to the sender, the loan defaulter had given out our analyst’s number as an emergency contact person. But one would have expected the fintech to verify the information the loan seeker dropped before taking such steps.
There are countless complaints on the pages of many of these loan apps on the Google PlayStore showing the deep grief caused by those messages.
What NITDA is saying about debt collection strategy
The National Information and Technology Development Agency (NITDA) has described the debt recovery strategy adopted by some of these fintechs as a data-sharing breach.
The agency frowned at such practices and emphasized that no fintech firm is allowed to share its customers’ data without due process.
This was made known in a press release by NITDA’s spokesperson, Hadiza Umah.
To curb the trend, NITDA imposed a sanction of N10 million on an online lending platform, Soko Lending Company Limited (Sokoloan), for data privacy invasion.
According to NITDA, it received a series of complaints against the company, including ‘unauthorized disclosures, failure to protect customers’ personal data, and defamation of character.
How fintechs access customers’ data
NITDA said its investigations showed that Sokoloan grants its customers uncollateralized loans and requires a loanee to download its mobile application on their phone and activate a direct debit in the company’s favour which grants the application access to the loanee’s phone contacts.
“According to the complainants, when he failed to meet up with his repayment obligations due to insufficient credit in his account on the date the direct debit was to take effect, the company unilaterally sent privacy-invading messages to the complainant’s contacts,” NITDA said.
An IT expert, Tolulope Ogundipe, told Nairametrics that some of the fintechs embed trackers that share data with third parties inside their mobile application without providing users information about it or using the appropriate lawful basis.
He said, “Some of them are guilty of unwillingness to cooperate with the Data Protection Authority, contrary to Article 3.1 (1) of Data Protection Implementation Framework; and non-filing of NDPR Audit reports through a licensed Data Protection Compliance Organisation (DPCO), contrary to Article 4.1(7) of the NDPR.
“I expect NITDA to ensure all of them are brought to book, as they will curb others in the industry. The challenge is that most of their victims won’t report their cases to appropriate quarters, as they suffer in silence due to ignorance.”
Bottomline
While NITDA is expected to investigate other erring fintechs and protect innocent Nigerians, it is important to note that the agency can only work on petitions/complaints filed to it by victims.
The loan defaulters that have experienced or are experiencing this illegal form of harassment are expected to report to NITDA for appropriate steps to be taken.
Findings made by Nairametrics show that a number of these loan app operators now send embarrassing short messages service (SMS) and WhatsApp messages to the close contacts of their loan defaulters with the intention of shaming the defaulters, tagging them with terms like ‘criminal,’ ‘fraudster,’ and ‘terrible debtor’ among others.
In some cases, the full names, phone numbers and pictures of the alleged loan defaulters are shared with their contacts like religious leaders, members of churches and mosques, close friends, bosses, colleagues and family members.
Victims Recount their Experiences
A paint manufacturer who introduced himself to Nairametrics as Adewunmi explained that he took a loan of N100,000 from one of the Fintech firms in Nigeria (Sokoloan) to deliver his products to a client. According to him, he defaulted for one week but had called the app’s staff four days before his repayment was due to explain that he would be unable to meet up with the repayment schedule on the said date.To Adewunmi’s surprise, his Pastor called him three days after he had repaid the loan and requested to see him urgently on a Friday evening.
“He called me into his house asking me questions on why I obtained a loan from a company and refused to pay as at when due. I was blank for some minutes before I told him I had repaid the fintech firm,” Adewunmi narrated.
“That is not true,” the pastor responded. “A member of the church and the Head of Department of the Prayer Champions called me this evening that the bank sent the same message to them calling you a fraudster and a cheat,” he said.
Adewumi recalls being flabbergasted at what his pastor narrated. “I showed him the proof of my payment and the response I got from the firm as an acknowledgement before he believed me. From that day, I made up my mind never to obtain a loan from any fintech firm again,” he stated painfully.
The SMS Sokoloan sent to Adewunmi’s contacts read:
“This is to inform the general public that Mr Adewunmi *** with telephone *** is a chronic debtor and a fraudster. He is on the run after duping a lending money company. You are advised to stay clear from him.”
Stella is another victim of the menace. In her case, she defaulted on a loan facility obtained from another fintech firm in Ibadan for one month in October 2020. According to the former staff of one of the local airlines in the country, she could not pay up because she lost her job a month before repayment was due.
“I had planned to refund the credit facility but when the unexpected happened, all my plans went south. I reached out to a designated staff of the loan app operator and pleaded for an extension of three months, to which the staff agreed.
“But I was shocked a week later when a friend I have not seen for five years called me, asking questions about my welfare and whether I was affected by the lockdown. I didn’t suspect anything until he told me he got a WhatsApp message from the fintech, alerting him to avoid doing business with me that I am a loan defaulter.
“When he forwarded the message to me, I knew it that I had passed my bounds and decided never to do that again. My friend sent the money to me and I repaid the loan. Obviously, the plan was to embarrass and disgrace me, so I would go to any extent to repay them. But what if I fell into depression and lost my sanity, how would that have made the fintech any better?” she recounted.
Another victim, Adeolu (name changed) recounted his experience to Nairametrics. In his case, he had obtained a loan of less than N30,000 with an interest of nearly 25% for a 15-day period. The repayment was due on a Wednesday and a staff of Kash Kash, the loan firm, called him to notify him that repayment was due.
Adeolu informed the staff that his invoices to clients were being delayed and requested that the fintech firm give him until Friday, which was the last day of the month, to repay. The staff agreed. The very next day, another staff of the firm put a call through to his wife, a lawyer, threatening her that the company was going to involve the police in the matter.
“My wife was embarrassed, especially since I had not told her of the loan. She asked about the amount and the repayment date. When she realised that the loan was overdue by less than 24 hours, she went berserk and gave the staff a dress-down. She also threatened to report their illegal action in contacting her to NITDA.
“The staff immediately became docile and explained that I had asked to be given until Friday to repay the loan. My wife assured her that there would be no further extension to the loan and the company backed off. Apparently, they are afraid of the regulators but they take advantage of the fact that most people are ignorant of the existence of NITDA and even the oversight functions of the CBN in regulating the activities of these fintechs.
“These agencies need to do more to help Nigerians know that they exist and are functional,” Adeolu said.
A Nairametrics analyst also shared his experience when a strange number sent a WhatsApp message to him (with a picture) that one Ms Damilola had defaulted in paying a loan obtained from the app.
The message read thus:
“FINAL WARNING!!! Good day, be informed Ms Damilola with phone number 081303xxxxx Is a defaulter who took LOAN and has vehemently refused to pay. Hence her actions has proven to be SUSPICIOUS. Kindly reach her and compel her to pay up her loan as the company is taking unfriendly & drastic measures including reporting her debt to CREDIT BUREAU as this is an ALLEGEDLY FRAUDULENT ACT. NOTE: You are getting this message because she gave us your number as EMERGENCY CONTACT.”
The shocking news here is that our analyst does not know the lady in question and the name of the fintech was not mentioned either.
According to the sender, the loan defaulter had given out our analyst’s number as an emergency contact person. But one would have expected the fintech to verify the information the loan seeker dropped before taking such steps.
There are countless complaints on the pages of many of these loan apps on the Google PlayStore showing the deep grief caused by those messages.
What NITDA is saying about debt collection strategy
The National Information and Technology Development Agency (NITDA) has described the debt recovery strategy adopted by some of these fintechs as a data-sharing breach.
The agency frowned at such practices and emphasized that no fintech firm is allowed to share its customers’ data without due process.
This was made known in a press release by NITDA’s spokesperson, Hadiza Umah.
To curb the trend, NITDA imposed a sanction of N10 million on an online lending platform, Soko Lending Company Limited (Sokoloan), for data privacy invasion.
According to NITDA, it received a series of complaints against the company, including ‘unauthorized disclosures, failure to protect customers’ personal data, and defamation of character.
How fintechs access customers’ data
NITDA said its investigations showed that Sokoloan grants its customers uncollateralized loans and requires a loanee to download its mobile application on their phone and activate a direct debit in the company’s favour which grants the application access to the loanee’s phone contacts.
“According to the complainants, when he failed to meet up with his repayment obligations due to insufficient credit in his account on the date the direct debit was to take effect, the company unilaterally sent privacy-invading messages to the complainant’s contacts,” NITDA said.
An IT expert, Tolulope Ogundipe, told Nairametrics that some of the fintechs embed trackers that share data with third parties inside their mobile application without providing users information about it or using the appropriate lawful basis.
He said, “Some of them are guilty of unwillingness to cooperate with the Data Protection Authority, contrary to Article 3.1 (1) of Data Protection Implementation Framework; and non-filing of NDPR Audit reports through a licensed Data Protection Compliance Organisation (DPCO), contrary to Article 4.1(7) of the NDPR.
“I expect NITDA to ensure all of them are brought to book, as they will curb others in the industry. The challenge is that most of their victims won’t report their cases to appropriate quarters, as they suffer in silence due to ignorance.”
Bottomline
While NITDA is expected to investigate other erring fintechs and protect innocent Nigerians, it is important to note that the agency can only work on petitions/complaints filed to it by victims.
The loan defaulters that have experienced or are experiencing this illegal form of harassment are expected to report to NITDA for appropriate steps to be taken.
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