In recent years, Nigeria has witnessed a surge in predatory lending practices by unregulated digital loan providers, commonly referred to as loan sharks. These entities offer quick, collateral-free loans but resort to unethical and illegal methods to recover debts, often involving the harassment of both borrowers and their acquaintances.
The Rise of Predatory Lending
The proliferation of digital loan applications in Nigeria has provided many with swift access to funds, especially as traditional banks impose stringent loan conditions. However, this convenience comes at a steep price. Many borrowers have reported exorbitant interest rates, unrealistic repayment periods, and invasive debt recovery tactics employed by these lenders.
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Exploiting Contacts as Collateral
A particularly distressing tactic involves lenders accessing borrowers’ phone contacts and sending defamatory messages to these individuals upon any delay in repayment. These messages often label the borrower as a defaulter or fraudster, urging recipients to pressurize the borrower into settling the debt. This practice not only violates personal privacy but also subjects innocent contacts to undue harassment.
The Guardian Nigeria
Victims’ Harrowing Experiences
Numerous Nigerians have fallen prey to these predatory practices. For instance, a borrower shared that after defaulting on a loan of just N6,000, the lender sent defamatory messages to all their contacts, even after a partial repayment had been made.
ICIR Nigeria
Another victim recounted how a loan app threatened to publish their pictures on media sites, causing significant emotional distress.
ICIR Nigeria
Luring Borrowers: Contacts as Implicit Collateral
These loan sharks often lure individuals by offering loans without traditional collateral. Instead, during the loan application process, borrowers are required to grant the app access to their phone contacts and photos. This access is then weaponized against them in cases of default. The lenders’ modus operandi includes:
• High Interest Rates and Short Repayment Periods: Borrowers are enticed with quick loans but are subjected to high interest rates and short repayment tenures, making timely repayment challenging.
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• Invasive Data Access: By accessing contacts and personal data, lenders ensure they have leverage over borrowers, using this information to intimidate and embarrass them.
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• Harassment of Contacts: Upon default, lenders send threatening messages to individuals in the borrower’s contact list, falsely claiming they are guarantors and urging them to compel the borrower to repay.
Nairametrics
Regulatory Response and Public Outcry
The Nigerian government and regulatory bodies have acknowledged these malpractices. The Central Bank of Nigeria (CBN) has warned citizens against patronizing unlicensed lenders and has emphasized the availability of legitimate credit avenues. The Federal Competition and Consumer Protection Commission (FCCPC) has also taken action by ordering the removal of certain predatory loan apps from digital platforms.
The Guardian Nigeria
Protective Measures for Borrowers
To safeguard against these predatory lenders, Nigerians are advised to:
• Verify Lender Legitimacy: Ensure the lending platform is licensed by the CBN and complies with regulatory standards.
• Read Reviews and Terms: Before borrowing, read user reviews and understand the loan terms, especially concerning interest rates and repayment periods.
• Limit Data Permissions: Be cautious about granting apps access to personal data, especially contacts and photos.
• Report Malpractices: Report any unethical practices to relevant authorities, such as the FCCPC or CBN.
While digital lending has bridged the credit gap for many Nigerians, the rise of predatory loan sharks underscores the need for increased public awareness and stringent regulatory oversight to protect vulnerable citizens from exploitation.
