Digital Lending And The Vexed Issue Of Cyberbullying -By Oyetola Muyiwa Atoyebi, John Oladipo & Jedidiah F. Akpata

INTRODUCTION

Technology as beneficial as it has been, has resulted in a new kind of financial blight – the proliferation of digital loan sharks. Given the rising harsh economic climate in Nigeria and the problem of unemployment, many Nigerians have found themselves in poverty. The Nigerian National Bureau of Statistics reported in 2020, that 40 per cent or 83 million Nigerians live in poverty[1]. This issue has led to the proliferation of lending/borrowing houses, some of which are not properly licensed.  Some of these financial lenders are usually referred to as Loan sharks.

A Loan shark is a person/an entity that loans money at extremely high-interest rates, and often resort to blackmail and cyberbullying/defamation to collect debts[2]. Loan sharks in the Fintech world are online financial institutions that offer the public easier access to borrowing funds, given the complexities often associated with commercial banks. The inability of many Nigerians to access loans from licensed banks has forced them to become victims of Lendtechs.

These Lendtechs have taken advantage of the loopholes in the banking sector, especially in the area of accessibility to loans and the advantage of technology to amass a following. Many of these Fintech loan apps, exploit borrowers’ lack of financial literacy, charging very high-interest rates. The impact of COVID-19 has also played a role in supporting the dependence of many Nigerians on fintech lenders, by increasing the number of mobile lending usage, most of these loans are often given without collateral, making them attractive to consumers.

The Nigerian Fintech industry in 2021 had over 144 fintech startups[3]. Compared to the previous years, the number of startups in this sector experienced an increase. Nigeria has, in fact, some of the highest numbers of Fintech startups in Africa, ranging from digital loans to remittances and transfer platforms. Although the number of digital loan companies in the country multiples by the day, the lenient nature of Nigeria’s regulation means that these companies are under minimal checks, and some of them take advantage of this laxity and exploit those in need of fast money.

THE REGULATORY FRAMEWORK FOR FINTECH LENDING HOUSES IN NIGERIA

It is imperative to note that Fintech lending houses are completely legal. Although there is no specific legislation regulating the sector, most of the legislations are subsidiary laws/guidelines made by the Central Bank of Nigeria, being Nigeria’s apex institution in financial matters and money lending laws of different states. In Nigeria, to engage in marketplace lending, such an entity must be registered either as a Bank, or Other Financial Institution by the Banks and Other Financial Institutions Act, 2004 (BOFIA). The Central Bank of Nigeria has also issued a guideline for companies wishing to carry on money lending business. Such companies may be licensed by the Central Bank of Nigeria, as a Finance Company under the Revised Guidelines for Finance Companies in Nigeria.[4]  In addition to this, there is the Moneylender Law of each state of the Federation and the Federal Capital Territory, which an entity must comply with to carry on business in the state it wishes to operate from. Unlike the license given by the Central Bank of Nigeria, entities registered within a state must comply with the interest rates of that state and other restrictions. The import of this brief analysis on the regulation of Fintech loan companies, is to accentuate the fact that there are regulations that govern this type of online financial transaction, hence it should be safe, legal and consumer-friendly.

Despite these regulatory frameworks/protection, consumers of these services have not been protected. This is as a result of the fact that although there are regulations in place, many of these online financial houses are either not registered or not properly licensed, or there is no proper check on their activities online.

In addition to the foregoing, it is impossible to divorce Fintech loan companies from Data protection laws. This is because, by the very nature of online lending, the only way to trace or track consumers will be by their data. It is because of this that the Nigeria Data Protection Regulation, 2019, places an obligation on digital lenders as Data Controllers to disclose what data is being processed, the specific purpose of processing the data, and obtain the consent of the Data Subjects to process the data. The Data Subject must also be informed of his right and the ability to withdraw his consent at any time.[5]

If there are regulations that govern digital lending, then we must ask the question, the purposes of this paper, why then does it seem that some digital lenders bully their customers and seem to get away with it?

FINTECH LOAN SHARKS AND CYBERBULLYING

In recent times, many digital lending platforms have been accused of Cyberbullying when they begin to make demands for the money lent. To properly appreciate the veracity of these assertions, it will be helpful to understand what cyberbullying is. Cyberbullying is bullying on the cyberspace or the internet as it is commonly called.

According to the United Nations International Children’s Emergency Fund, (UNICEF), Cyberbullying is “bullying with the use of digital technologies”. It can take place on social media, messaging platforms, gaming platforms and mobile phones. It is a repeated behaviour, aimed at scaring, angering, or shaming those who are targeted. Examples include:

1. Spreading lies about or posting embarrassing photos or videos of someone on various social media platforms.
2. Sending hurtful, abusive, or threatening messages, images, or videos via messaging platforms.
3. Impersonating someone and sending mean messages to others on their behalf or through fake accounts.[6]

It is imperative to note that many digital lending companies have resorted to adopting these tactics for the recovery of loans, which are indeed inimical to acceptable behaviour and in contravention of regulations. Not only that, but the companies also use crude methods similar to Shylock’s tactic, to enforce loan repayment from their customers. The majority of Loan Shark Fintech companies, spread defamatory and malicious information about their defaulting clients with third parties. This method often comprises of sending messages to the contact of the defaulting party, posting their pictures on social media platforms, and using defamatory words to describe them.

CONCLUSION

There is a need for laws that would govern the operations of digital lenders in Nigeria as a whole. Nigeria’s lawmakers must learn from other countries that have enacted legislation, to address the emerging challenges of the Fintech industry, such as Kenya’s Central Bank Act, which was amended to include a comprehensive guide, on how digital lenders and Fintech companies should operate.

In addition, the National Information Technology Development Agency’s action in sanctioning a rogue fintech firm is commendable. The N10 million penalties imposed on Soko Lending Company, for sending threatening messages to borrowers, which constitutes a privacy invasion, will serve as a deterrent to other Digital lenders, ensuring that they work within the law in order to collect their funds.

Apart from the fines which NITDA has the power to sanction and collect from these digital traders, borrowers can also institute a civil action against them for defamation of character.

AUTHOR PROFILE                                          

AUTHOR: Oyetola Muyiwa Atoyebi, SAN.

Mr. Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm) where he also doubles as the Team Lead of the Firm’s Emerging Areas of Law Practice.

Mr. Atoyebi has expertise in and a vast knowledge of Telecommunications, Media and Technology Law and this has seen him advise and represent his vast clientele in a myriad of high level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of a Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: John Oladipo

John is the head of the Technology Law Team at OMAPLEX Law Firm. He also holds commendable legal expertise in cybersecurity.

He can be reached at john.oladipo@omaplex.com.ng

CONTRIBUTOR: Jedidiah F. Akpata

Jedidiah is a member of the Litigation and Dispute Resolution Team at OMAPLEX Law Firm. He also holds commendable legal expertise in Technology Law.

He can be reached at Jedidiah.akpata@omaplex.com.ng

[1], Nigerian Bureau of Statistics, ‘Nigerias GDP’ https://nigeriabureauofstatistic.org.ng accessed 20 February 2022

[2] Julian Kagan, ‘Loan Sharks’ https://www.investopedia.com/terms/l/loan sharking.asp accessed 20 February 2022

[3] Statista ‘Number of Fintech Startups in Nigeria from 2017 to 2021’ < https://www.statista.com/statistics/1252523/number-of-fintech-startups-in-nigeria > accessed  20February, 2022

[4] Central Bank of Nigeria, ‘Revised Guidelines for Finance Companies in Nigeria’< https://www.cbn.gov.ng/out/2014/ccd/revisedguidelinesforfinancecompaniesinnigeria.pdf > accessed 20 February, 2022

[5] Olayanju Phillips ‘Nigeria: Regulation Of Digital Lending In Nigeria’ <https://www.mondaq.com/nigeria/financial-services/982138/regulation-of-digital-lending-in-nigeria > accessed on 20 February 2022

[6] ‘Cyberbullying: what it is now and how to stop it’ https://www.unicef.org/end-violence/how-to-stop-cyberbullying accessed on 20 February 2022