The Need to Regulate Online Lending Companies

In the olden days, people collect loans using their properties, including family members, as collateral. Then, a person that collected a loan and defaulted put his whole family in jeopardy. Depending on the amount of money he collected and the quality of his collateral, if he has any, the lender may decide to confiscate some or all of the borrower’s properties. Those that have nothing to give may have their households turned into wives, servants, or slaves of the lenders. No matter what the lender decides, his action towards recovering his money affects the borrower’s immediate and extended family; and no one can stop them. Greedy people used that excuse to lend to individuals that couldn’t pay them back because they have motives, which they could easily achieve by making their targets indebted to them. Through this method, many of our forefathers acquired lots of farmlands, slaves, servants, wives, children, animals, and other things used to measure wealth. Thanks for the coming of the colonialists, who, to a large extent, put a stop to all these.

As the era of human slavers and property confiscators came to an end, that of loan sharks began. These people are merciless. They lend to people at very high-interest rates and recover their principal and interests through intimidation and the use of violence. Once again, members of a borrower’s family face another type of risk. But unlike the former lenders that would have converted them to slaves, servants, and/or wives, or take their properties away, loan sharks harass, abduct and/or murder them to send messages across to the borrower. For that, a person that borrows from these sharks and defaulted is helped by his people to offset the loan because they are equally in danger.

But loan sharking is illegal just the way slavery is. However, confiscation of properties still exists. Our banks will not give you loans without collateral that commiserates with the amount borrowed. Hence, if the borrower defaults, the collateral is confiscated. But other properties of the borrower are left for him and his family and none of his family members is harassed or attacked. The deal is only between the bank and the customer (or his guarantors, as the case may be).

But there is a group of lenders that is combining the attitudes of slaver and shark lenders to recover their money. Unlike the banks, they do not collect collateral, thereby making it easy, fast, and convenient for people to access loans. These companies are accessible to low-income earners because they give small amounts of money as loans, unlike banks that only listen to those that borrow in millions. They are also attractive because their interest rates are usually between 3% and 6%; so, when borrowers calculate what they have to pay back, they are not discouraged from borrowing. All in all, many people run to these loaning companies for instant loans.

The loan companies described above are springing up every day in the country. Many of them have an online presence while some still operate offline. But the major interest of this essay is the loan companies that operate online, especially those that use apps. These are the companies whose attitudes have raised concerns from well-meaning Nigerians. They are the ones that need to be regulated as soon as possible.

As stated earlier, these companies are willing to give loans almost without collateral. They only demand that their customers download their apps, apply for loans, and wait for the approval. If the application is approved, voila! the money is there for you to spend. But then, as I implied above, they give loans with almost no collateral. This means there’s still collateral – your phone’s contact list. Yes, like the shark and slaver lenders, these people have an interest in the people close to you. They see those people as what should be used to hold you ransom or blackmail you into paying your loan. What they do with the numbers saved in your phone is almost the same as what kidnappers do when demanding ransom. The only difference is that, in the former scenario, there is a contract between the borrower and the lender.

If you are wondering how these companies gain access to borrowers’ contacts, know it now that they do so during the loan application process. As you are entering your details into their apps, you will be asked to allow the app to access your contacts. Many of us do not think twice before granting this permission. But unknown to many of us, that simple act exposes all the people in a phones’ contact list to the managers of the app. This is how these companies get to your friends, relatives, and acquaintances of people that fail to pay back loans by a few hours.

Initially, people had no qualms with being alerted that someone they know is defaulting. But as time goes on, the style of loan recovery became more offensive, aggressive, and threatening. The SMS sent out these days are no longer notifications but threats to the contacts and borrower. At a time like this, when scams, kidnappings, and other forms of crimes are the order of the day, receiving a message that promises you hell if so-so and so person did not pay what he borrowed is not welcoming. Many people that receive such messages become tensed up because they don’t know what the person indicated did. Some become confused because they don’t know the person indicated. By the end of the day, because of a small loan taken by an individual, hundreds of people are put through stress and anxiety.

The modus operandi of these online loan companies should be reviewed and regulated before it gets out of hand. The method may be working for them but it is an improper way to work. To start with, accessing and harassing owners of private phone numbers, without their consent and prior knowledge of the loan, is out of place and a civil offence. Secondly, notifying all the contacts in their borrowers’ phone about a loan default is a breach of privacy (borrower deserves right to privacy even if he breached a contract). Thirdly, the use of threat, aggression, and intimidation to recover money, as far as I am concerned, is criminal-oriented. These companies should be placed under a regulator that is up and doing. They have gradually turned into loan sharks. If they are not brought under control through heavy regulation, they will soon begin a physical confiscation of properties and the harassment of customers and their contacts.