By Ebenezer Chisom Amadi
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INTRODUCTION
In this digital age, lending apps have gained immense popularity in Nigeria, offering convenience and accessibility to consumers seeking quick loans in Nigeria to solve their urgent financial needs. With just few minutes of filling information online on the loan app, borrowers can secure money without facing the challenges of traditional banking procedures which requires series of stringent documentation and sometimes a collateral. However, some of these loan apps adopt unethical practices, such as the public shaming of loan defaulters, calling their phone contacts to report them that they are owing. One of such disturbing unethical technique used by loan apps involves posting defaulters’ pictures on social media platforms, which is a gross violation of privacy and consumer rights of Nigerians who access these loans.
The right to privacy is a fundamental human right enshrined in section 37 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended)[1], the Nigeria Data Protection Act 2023[2] and various legal frameworks across the globe. In Nigeria, Financial institutions and loan providers, including digital lending platforms, are bound by this legislation to protect the personal data of their customers.
It is unethical and unlawful for digital loan apps to publish loan defaulters’ pictures on the internet without their consent, when they engage in this alarming tactic, they breach privacy rights of the customer and also violate the Nigeria Data Protection Act 2023. This public exposure often leads to humiliation, mental distress, and reputational damage for the individuals involved.
PRIVACY CHALLENGES OF DIGITAL LENDING IN NIGERIA
- FAILURE TO PROCESS PERSONAL DATA IN LINE WIT THE PRINCIPLES OF PERSONAL DATA PROCESSING
Digital lending apps function by collecting and processing personal data from consumers, this includes sensitive personal data such as:
- Identification documents, example National Identity Number, Permanent voters card, International passport.
- Bank account information and financial history
- Access to phone contacts, call logs, messages, and photo galleries.
- Facial picture
The collection and processing of these personal data is often justified as important for the purpose of credit assessment of the user. However, the lack of transparency about how it is processed is disturbing. Some of these loan apps don’t process personal data in line with the principles of personal data processing which include:
- Lawfulness, fairness and transparency
- Purpose limitation; personal data should be collected for specified, explicit, and legitimate purposes, and not to be further processed in a way contrary with these purposes.
- Data minimization; personal data processing should be adequate, relevant, and limited to the minimum necessary for the purposes for which the personal data was collected or further processed.
- Storage limitation; personal data should not be retained longer than is necessary to achieve the lawful bases for which the personal data was collected or further processed.
- Data must by accurate, complete, not misleading, and, where necessary, kept up to date having regard to the purposes for which the personal data is collected or is further processed.
- Data security; personal data must be processed in a manner that ensures appropriate security of personal data, including protection against unauthorized or unlawful processing, access, loss, destruction, damage, or any form of data breach.[3]
UNETHICAL PRACTICES IN DEBT RECOVERY
One of the most alarming aspects of digital lending apps is their unprofessional, unethical and aggressive debt recovery practices. Recent reports have shown some digital lending apps engaging in unethical practices such as:
- Posting personal information of loan defaulters online; there have been frequent instances where loan defaulters’ pictures, phone numbers and personal details were posted on various social media platforms to force them to make payment of their loan.
- Harassment, intimidation and threatening of borrowers; sometimes, some digital loan apps continuously call, insult, abuse and threaten to destroy the borrower if the person refuses to make repayment of the loan. This is a common tactic used by some digital loan apps.
- Accessing borrower’s contacts and calling them; some digital loan apps go as far as accessing borrower’s contacts, sending messages to the contacts and calling them as well , disclosing the borrowers financial status and shaming them in order to pressure the defaulters to pay the loan.
REGULATORY EBFORCEMENT CONCERNS
There is an issue of regulatory bodies enforcing the regulatory laws on defaulters in Nigeria. The Nigeria Data Protection Act 2023 is the principal legislation enacted to safeguard privacy rights; ensure that personal data is processed in a fair, lawful and accountable manner; and provide means of recourse and remedies, in the event of the breach of the data subject’s rights.[4] The Nigeria Data Protection Commission is the regulatory body established by the Nigeria Data Protection Act 2023(NDPA)[5] to safeguard the privacy rights of people in Nigeria, their functions include:
- To ensure data controllers and data processors comply with national and international personal data protection obligations and best practice.
- To register digital loan companies who are data controllers and data processors of major importance.
- To promote awareness on the obligation of data controllers and data processors under the Nigeria Data Protection Act.
- To receive complaints from data subjects relating to violations of the NDP Act or subsidiary legislation made under the NDP Act.
- To conduct investigations into any violation of a requirement under NDP Act or subsidiary legislation made under the NDP Act by a data controller or a data processor.[6]
- To impose penalties in respect of any violation of the provisions of the NDP Act or subsidiary legislation made under the NDP Act.[7]
Despite the robust provisions of the NDP Act to safeguard data subject rights in Nigeria, the Nigeria Data Protection Commission has failed to effeciently enforce these privacy rights on the defaulters, particularly digital loan apps who are also registered with NDPC. This is a growing concern in Nigeria. Many data subjects report data breaches to NDPC but most of the time no serious punishment is enforced on the defaulting data controllers/processors.
Another regulatory body that protects consumer rights is the Federal Competition and Consumer Protection Commission (FCCPC) established by the Federal Competition and Consumer Protection Act[8] to ensure administration and enforcement of the provisions of Federal Competition and Consumer Protection Act with respect to competition and protection of consumers rights; to eliminate unfair, misleading and unconscionable marketing and business practices; and to protect and promote consumer interests.[9]
IMPACT ON CONSUMERS
The violation of privacy rights of consumers by digital lending apps has far-reaching consequences on the users which include both psychological and social Impact. The Borrowers subjected to such unethical practices may experience:
- Emotional distress: The posting of the personal data of the borrower to the public can cause anxiety, depression, or even suicidal tendencies.
- Social stigma: The humiliation and public embarrassment can destroy their reputation in their society, association, workplace, friends or family circles.
- Economic hardship: When a borrower’s reputation has been damaged, it can obstruct the borrower’s ability to secure future loans or employment.
- Economic exploitation: Most times, there is lack of transparency about fees, interest rates, and penalties , these challenges often traps borrowers in a cycle of debt. The loan apps mostly present one sided contracts which the borrowers often accepts out of pressure.
RECOMMENDATIONS TO ADDRESS THE GROWING CONCERN
To solve the privacy violations by the digital lending apps and restore trust in their business, there is need to adopt the following recommendations:
- Enforcement of the Nigeria Data Protection Act and other regulations:
The Nigeria Data Protection Commission should enforce the NDPA on all digital lending apps operating within the jurisdiction of Nigeria. Defaulting digital lending companies should be heavily sanctioned for privacy violation in order to deter other digital lending companies from violating privacy rights of other borrowers.
- Need for Consumer Awareness and Education:
There is an urgent need to educate and enlighten consumers in Nigeria about their privacy rights and the measures they can enforce their rights in the event of any violation.
- Strict Accountability Measures:
The regulatory bodies should impose heavy penalties on platforms violating the privacy of borrowers.
- Adoption of Ethical Lending Practices:
Digital lending apps should adopt transparent policies for the collection and processing of personal data of borrowers. They should comply with the principles of processing personal data.
LEGAL REMEDIES FOR VICTIMS
Loan defaulters who are victims of such illegal and unethical practices by digital loan platforms have legal remedies available, including:
- Filing complaints with the Nigeria Data Protection Commission and other regulatory authorities for violation of privacy laws
- Seeking redress through filing civil action in Courts seeking monetary damages for breach of their privacy rights and mental harassment.
CONCLUSION
Digital loan apps have revolutionized financial services and they give a lifeline for millions of consumers who need financial assistance, their unethical use of consumers’ personal data undermines trust and breaches privacy rights of consumers. The frequent public embarrassment and shaming of loan defaulters via social media platforms is both unethical and unlawful. There is urgent need to strike a balance between innovation and consumer protection, ensuring that adoption of technology in doing business does not violate fundamental human rights of consumers. It is paramount for regulators, consumers, and digital lending platforms to collectively work towards adopting a system that upholds and safeguards privacy rights, fairness, and dignity in the processing of personal data in digital lending ecosystem.
[1] See Okafor & Ors V. Ntoka & Ors (2017) LPELR-42794(CA)
[2] Section 34 to 40 Nigeria Data Protection Act 2023
[3] Section 24 Nigeria Data Protection Act 2023
[4] Section 1
[5] Section 4 supra
[6] Section 6 NDP Act 2023
[7] ibid
[8] Section 3 Federal Competition and Consumer Protection Act
[9] Section 17 Federal Competition and Consumer Protection Act
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