Digital Lenders Association says every customer has constitutional right to privacy
The Digital Lenders Association of Kenya (DLAK) has thrown its weight behind the regulation of the digital lending industry.
It states that such a move should will professionalize the market and should primarily encompass data privacy, business and consumer protection, as well as reporting requirements.
“Every customer has a Constitutional right to privacy. Digital lenders must incorporate this integral fact into their policies and processes and protect consumers from unnecessarily revealing personal information,’’ said DLAK spokesperson Kevin Mutiso.
DLAK has 11 members: Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, Lpesa, Kopacent, Four Kings Investment, Kuwazo Capital and Finance Plan.
The firms aver that protection of consumers privacy protection and empowering users with better control and visibility over their personal information is crucial.
They further note that ethical guidelines on gathering and use of customer data as well as customer-friendly standards of collecting debts have already been incorporated among them for the put-into-effect Code of Conduct.
However, the association opined that not only proactive and responsible lenders should fall under such regulations but the laws should be spread over the whole industry.
DLAK also said regulating collection, use and management of credit data will boost consumer protection and enhance financial inclusion.
Key to this protection, DLAK says, would be to institutionalize reporting to credit reference bureaus as the formal channel where borrower history is shared.
This they say should be done in a legal manner which will further open up access to credit for many unbanked low-income population.
Visible credit data points are also expected to play a big role in guiding ethical debt collection practices to protect consumers from rogue and abusive debt collectors.
“We strongly support the idea of developing a common approach to credit data for all lenders whether they are banks, MFIs, digital or not. This will enhance financial inclusion and will increase customer protection furthermore,’’ Mutiso said.
Digital lending services have reportedly become an important driver of financial inclusion Kenya.
According to DLAK, the services have proven crucial for creating the opportunity to extend capital to unbanked and other financially excluded groups.
The State of Digital Consumer Credit Market Report by Center for Financial Inclusion found that 86 per cent of loans initiated between 2016 and 2018 were digital.
In reference to this, DLAK is calling for a concerted effort between all lenders and Credit Reference Bureaus to come up with a robust system to give real-time customer credit application data.
They opine that it is crucial to use the licensed Credit Bureau data since they have sufficient information about most of the lenders.
“We believe that any professional lender has to report customers’ applications and customers’ loans real-time. There should be an initiative by the industry and CRBs to have this implemented in Kenya,” said Mutiso.
“What is missing is that part of the data is not updated as fast as it should be since it appears this has not become an obligatory practice for all,” he added.
DLAK maintains that its strategy regarding the professionalisation of the industry goes far beyond data collecting and protection issue.
Further, the association says it supports consumer-centric initiatives stemmed from financially-developed markets.
One of the initiatives cited by DLAK is the lenders’ registry: an official list of licensed money lenders complying with regulations and ethical standards.
According to DLAK, such an institution will help the industry to eradicate dishonest players, thus increasing the level of mobile borrowers’ comfort and protection.
The association adds that collective effort in improving market standards will contribute to further financial inclusion and, under no circumstances, should be underestimated.
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