Using forgery, impersonations and breach of privacy, Digital Money Lenders (DML), popularly called loan sharks, will go to any length to retrieve their funds from Nigerian loan defaulters. In this investigation, Daily Trust Saturday reveals how the largely unchecked and unregulated activities of loan sharks by regulatory bodies are pushing the country's lower class to the edge.
Maryam Audu is paranoid, to the extent of blocking all calls from getting through to her phone. She has, in the last six months, faced mental and emotional torments in the form of message threats, harassing voice notes and ridicule before family and friends.
She is a victim of a vicious cartel of Digital Money Lenders (DML), who uses unconventional and illegal means of threats and harassment to torment loan defaulters into paying their debts.
Digital Money Lenders have earned the name of loan sharks in Nigeria for not only charging exorbitant interest rates but adopting threats and harassment to recover loans.
In response to a rising complaint over their savagery loan recovery techniques, the federal government, in March 2022, commissioned the Joint Regulatory and Enforcement Task Force (JRETF) to probe and clamp down on DML operators who violate the ethics of lending and individual data privacy.
The inter-agency task force included the Federal Competition and Consumer Protection Commission (FCCPC), the National Information Technology Development Agency (NITDA), the Independent Corrupt Practices and Other Related Offenses Commission (ICPC), the Nigeria Police Force and the Economic and Financial Crimes Commission (EFCC).
The operation led to the freezing of some DLM accounts and the FCCPC delisted over 30 loan apps from the Google Play Store.
Incidentally, despite these measures, Daily Trust Saturday investigations reveal that these loan sharks have continued to operate in open sight, with their activities having dire consequences on the mental and emotional health of borrowers.
In the absence of publicly available statistics on the number of digital borrowers in Nigeria, this newspaper gathered that due to its ease of accessibility and no collateral demands, thousands of low-income Nigerians are drawn to DMLs without fully understanding their modes of operation, debt recovery techniques and the illegal structures they operate on.
However, while the blame is mostly being pushed towards the lenders during conversations, some observers also questioned the rationale behind the borrowing, saying some Nigerians trapped in the saga also collected the loans under questionable circumstances, believing that they could go away with it.
Trapped in a circle of debt
Maryam Danladi, a widow and mother of two, who resides in Niger State, is one of many Nigerians lured by the 'quick, easy and collateral-free' offers made by digital money lenders.
Speaking with Daily Trust Saturday, she narrated how months of torment by agents of multiple DML operators pushed her into chronic depression that led to suicidal thoughts.
"I was considering suicide, but when I looked at my children, I thought if I killed myself nobody would look after them the way their mother would," she said.
Maryam's problem began when she sought financial assistance for the upkeep of her children and was unable to get help. When she bumped into a loan app advertisement for "We Credit" while surfing Facebook, she downloaded it; a decision she would later regret.
She explained that while advertising the loan facility, "We Credit" had indicated that they could lend her up to N200,000 to be paid within 90 days.
"But in reality, they gave only a week to repay after deducting a significant amount they called 'service charge'.
"After registering, what I saw was a loan of N6,000 to pay back N10,000 within seven days. After a short while, they credited my account with N4,000 instead. They deducted N2,000 as service charge," she narrated.
She added that when she couldn't pay back within seven days, the embarrassment and insults from the lenders drove her to download two other loan apps to repay the first loan. This situation repeated itself over time, and in just six months, she was caught in the shackles of debt that has held her prisoner till date.
"That was how it started. Before I knew what I was doing, I was in the middle. You keep borrowing from one app to pay the other, and before I knew what was happening, I had downloaded about 11 to 12 apps," she said, regretfully.
With an accumulated debt of N1,328, 122 borrowed overtime from about 12 apps, she now owes about N2,201,737 with interest.
Similarly, Roseline Audu, a civil servant, almost consumed a popular poisonous insecticide called Sniper to end her life due to humiliation from loan sharks.
"I was not far from being suicidal because I had entered my bathroom to drink the Sniper insecticide, but the smell was offensive to me," she said, adding that the thought of leaving her children behind and the fear of putting her husband into a difficult position also deterred her from suicide.
"Every night, I cried, I lost weight, I couldn't eat, and nothing was appealing to me," she said.
Her nightmare with loan sharks began in May 2023 when she received a text message advertising a loan facility. After going through the Play Store to verify the app, she explained to Daily Trust Saturday how she proceeded with the registration and was offered a N6,000 loan.
"When you click on apply, instead of them to allow you select options, it will tell you loan approved automatically," she added.
Roseline said her target was to pay as soon as she received her monthly salary. However, a slight delay in the salary disbursement led to a barrage of harassment, which made her download two other apps to repay one loan, a situation that continued over time.
"Before the seven days, I was like salary would soon come and I would pay. Unfortunately, my salary was delayed. In fact, on the fifth day, I started getting calls from their agents. If you argue with them, they will start harassing you.
"Due to constant insults, when a call comes in I start trembling. I went into depression and I couldn't tell anybody. When the loan and interests accrued to N1million, I was helpless," she said.
Roseline said she had borrowed about N1,500,000 from the DML operators but had already paid more than N3m to them due to high-interest rates. She, however, still owes a debt of about N400,000, which she said she hoped to repay to get back her life.
Ahmad, a student of one of the tertiary institutions in Bauchi, said he was depressed and nearly dropped out of school when he was boxed into a corner by one of the lenders.
"Let me be frank with you, when I collected the loan I thought they would not be able to track me, but I was wrong.
"What I collected wasn't really much, but the loan increased more than 700 per cent within a very short period and the lenders kept threatening me.
"I really don't know how they did it, but they succeeded in tracking my account. Whenever my parents sent me upkeep money they would withdraw everything. I kept it to myself and at the risk of sacrificing my studies.
"One day, I summonedcourage and sent the account of my friend to my elder brother to send my upkeep. I think my brother suspected something and insisted I must tell him the truth. That was when I opened up.
"The money lenders are really dubious, but I also blame myself for thinking that I could shortchange them. I hope the government would put an instrument on ground to checkmate them because they are destroying the lives of many people silently," he said.
How DMLs breach customer data privacy
Maryam, Roseline and Ahmad's cases are part of a large case of harassment, bullying and breach of privacy by many loan apps.
In 2021, the National Information Technology Development Agency (NITDA) fined Soko Loan, a notorious loan shark, the sum of N10,000,000 for data privacy invasion of customers.
Checks by Daily Trust Saturday revealed that in May, Google updated its personal loans policy as a result of the increasing reports of offensive lending practices in Nigeria and Kenya, the two African countries with significant adoption of digital lending services.
As part of the changes, Google noted that personal loan apps would have no access to sensitive user data, such as photos, videos, contacts, precise location data and call logs.
Incidentally, these loan apps have remained adamant as they continue to breach users' privacy by using customer contact lists and images to threaten them.
Daily Trust Saturday gathered that they pick numbers from customers' contact lists to either call or send slanderous messages to the contacts with the aim of debt-shaming the defaulters.
Concurrently, the Federal Competition and Consumer Protection Commission (FCCPC), which oversees the registration of DMLs and is tasked with ensuring compliance and protection of consumers from being exploited by lenders, in September shook up the digital money lending industry by delisting over 30 illegal loan apps.
Investigations by Daily Trust Saturday reveal that some delisted apps like Eagle Cash and Fly Pay have rerouted from Google Play Store to Android Package Kits (APK) file formats, using these websites to host their apps, offer loans, harass individuals and breach their privacy.
Our reporter reached out to the FCCPC, which currently oversees the registration of these DMLs by asking if it was losing the fight with these loan sharks and whether it was aware that the delisted apps were still active, but the commission failed to respond.
The head of the FCCPC Public Relations Office, Ondaje Ijagwu, had asked this reporter to forward the questions to him via WhatsApp, and when done, he failed to respond despite several promptings.
Findings show that to access customer data, app subscribers are requested to grant mobile app permissions to certain data points, like location, contacts and pictures. However, when DMLs get hold of these data, they send defaming messages to the contacts in a bid to embarrass the debtors.
Victims of these harassments say Apex Lending, Eagle Cash, Fly Pay, Cash Loan and Credit Wallet, are some of the notorious apps that have breached their privacies, as well as harassed borrowers.
Daily Trust Saturday reached out to Apex Lending, Eagle Cash, Fly Pay and Credit Wallet via their respective email addresses to get their reactions to these allegations but only Credit Wallet responded to the email.
Martha Olowe, the assistant Customer Service manager for Princeps Credit Systems Limited, the parent company of Credit Wallet, said they would only respond to the allegations when they received official emails from the victims and full details of the concerned customers were provided.
"The full details of the people concerned on the subject should be provided to validate the source of your information about our organisation. We would require an official email from the individuals concerned, giving their consent to discuss and divulge their personal information to balance your report as their investigator on this matter," she added.
Roseline Audu described her experience with Apex Lending, an approved DML that meets the FCCPCs' digital money lending requirements, as a nightmare.
A check on the data safety segment of Apex Lending on Google Play Store shows that the app states that it does not share user data with third parties and only collects personal information. But users said the contrary.
"When you install the app they ask for permissions. You can't access the app unless you grant them permission. What they do is to download the customer contacts on the phone. That is what they use to harass people," Roseline said.
She added that agents of Apex Lending had sent a screenshot of her contact list and threatened that messages would be sent to them if she failed to settle the loan.
In Maryam's case, agents of Cash Loan took her WhatsApp profile picture, which had her two kids on it, engraved it with Rest in Peace (RIP), and sent her messages, asking for her preferred method of death.
All these are a violation of the governing principle of data processing as contained in the Nigeria Data Protection Regulation of 2019. Part two, section 2.1(2) of the regulation states that "anyone who is entrusted with personal data of a data subject or who is in possession of the personal data of a data subject owes a duty of care to the said data subject."
Efforts were made and questions sent to the spokesperson of the Nigeria Data Protection Commissions, Itunu Dokunu, regarding the commissions' action plan on loan sharks that breach customer data and privacy but he failed to respond to the questions.
Charging exorbitant interest, service rates
Maryam Danladi alleged that "almost all of the apps I have used charge between N3,000 to N6,000 as daily interest rates. In fact, I don't even have the mind to open those apps again. I don't know what the apps are reading now."
Since a lot of these digital money lenders are headquartered in Lagos and governed by the Moneylenders' Law of Lagos State, Cap M7 2009, the license is issued by the Lagos State Ministry of Home Affairs and Tourism.
Any DML based in the Federal Capital Territory (FCT) will be issued a license and certificate by a designated magistrate on a yearly, renewable basis, only after the application for a license is officially made at the Chief Magistrate's Court.
Section 15(1)(c) of the Lagos State Money Lenders Law 2009 only allows 'simple' interest at the rate of 48 per cent (maximum) per annum for unsecured loans, just as in the case of digital money lenders. Charging higher interest rates is a violation that could lead to conviction and a fine of N600 in respect of such a loan.
An investigation by Daily Trust Saturday revealed that both Apex Lending, Eagle Cash and Fly Pay or Fly Kash flout this law. They capitalise on customer's desperation to offer loans at high interest rates after deducting a significant sum from the loan amount as service charge.
Confirming this, Roseline had requested for a N150,000 loan from TLoan on September 16, 2023 to be paid on September 23, but she was credited with N105,000. A 'service fee' of N45,000 was deducted upfront.
Eventually, she would later be asked to repay N204,000. This means she is to pay N96,000, which is equivalent to 91 per cent of the loan she was credited with.
As part of its policy, Google Play Store does not allow apps that expose users to deceptive or harmful financial products and services. It states on the policy centre that "all financial apps must display their maximum Annual Percentage Rate (APR), calculated for their customers."
Checks by Daily Trust Saturday revealed that despite Apex Lending having met all the requirements stipulated by Google and being in line with the Guidelines for Digital Lending 2022, their review section on the Google Play Store is flooded with negative comments by users.
Some of the comments described the app as a scam and fraud, while others expressed disappointment, accusing the DML of unscrupulous deductions.
How DMLs use forgery, impersonations to harass lenders
Fly Pay, one of the delisted loan sharks, has consistently impersonated the Economic and Financial Crimes Commission and the Nigeria Immigration Service by sending purported letters of loan escalation notice, travel ban and arrest warrants to loan defaulters.
While scrutinising the purported undated letters from the EFCC by Fly Kash, our reporter found red flags in the spelling of the organisation's name. CRIMES, from the commission's name, was spelt as CRIME, without the letters. One of the letters, which was purported to have been signed by Abdulrashid Bawa and delivered on September 29, 2023, came at a time he was incarcerated.
A second letter purportedly from the EFCC signed by Abdulkarim Chukkol, the director of operations, was also discovered to have been fake.
Findings revealed that Chukkol was the acting chairman of the agency at the time the letter was delivered, not the director of operations.
Daily Trust Saturday reached out to the anti-graft agency and its acting spokesperson, Dele Oyewole refuted the letters, saying, "I wish to place it on record that the Economic and Financial Crimes Commission does not issue arrest warrants on loan defaulters. All documents flying around with all manners of information such as arrest warrant processing and all those claims being made are not from the EFCC."
Oyewole noted that DMLs use such fraudulent ways of compelling customers to repay their loans. He said the commission would not allow anyone to use its name to make fraudulent claims as those culpable would be prosecuted.
Equally, Daily Trust Saturday reached out to the Nigeria Immigration Service to ascertain if the travel ban letter Fly Pay sent to Roseline was approved by it, and the public relations officer, Aridegbe Adedotun, described the letter as forged and devoid of all of their security features.
"I want to say emphatically and categorically that this letter didn't emanate from the Nigeria Immigration Service. It is forged. We have our security features in all our letters. It was surprising when we saw it," he said.
Adedotun added that the service is currently investigating the matter to ensure that those involved are brought to book.
CBN derelicts responsibilities
An investigation by our reporter showed that generally, money lending falls under the realm of financial services the CBN regulates. While microfinance, commercial banks and finance houses are the digital lenders licensed by the CBN, loan sharks operate under the state's money lender laws.
Section 57 of the Banks and Other Financial Institutions Act (BOFIA), 2020, statutorily makes the CBN the primary regulator governing financial services, with the mandate to regulate banks and the business of other financial institutions, which include those solely operating electronically, virtually or digitally.
Invariably, this means the CBN is required to incorporate and also license fintech businesses, which loan sharks are part of, except those involved in pension fund management, collective investment schemes, insurance and capital market business.
Incidentally, these digital lending companies resort to state money lender licenses, not the CBN license as required by section 57 of the BOFIA Act. Currently, the FCCPC's Digital Lending Guidelines 2022 oversees the registration of DMLs.
Section 163(1)(c) of the FCCPC Act empowers the commission to make regulations on administrative penalties, fees, charges or levies and other related matters.
However, there are no clear provisions or directives concerning penalties for non-compliance stated in the DMLs registration guidelines. This means that no penalty or sanction would be met on digital lenders who even fail to register with the FCCPC or when they compromise standard.
The CBN, through its spokesperson, Isa Abdulmumin, declined to comment on the question as to why these loan sharks are not licensed and regulated by the CBN, which is statutorily mandated as the primary regulator of all financial services in the country.
However, a senior management staff of the apex bank who spoke under anonymity said, "Unlicensed loan sharks are illegal financial entities, and the apex bank has repeatedly cautioned borrowers to avoid obtaining loans from them to avoid running into financial difficulties."
Banker's reaction
Hakeem Ikumogunniyi, Regional Manager, North, Cooperative Mortgage Bank, said Nigerians find loan apps advantageous due to the delay in processing bank loans which are highly collateralised and involve signing of bulky documents.
"One of the major reasons as to why people prefer loan apps to bank loans is the turnaround time. The turnaround time for a bank loan is extremely long and it involves signing a lot of documents before the loan can be granted. But the loan app has a lesser processing procedure although it is riskier," he said.
"Because it is very easy to secure a loan online, those with urgent needs even if they're civil servants, they'll approach loan apps as it is tied to little or no collateral. That is why when a person defaults in repayment, they'll use any possible means to get back their funds," he added.
Ikummogunniyi, a seasoned banker with two decades of experience described both loan methods as good ways of accessing loans. He however said while loan apps bank on character and credit worthiness which is a British way of banking; conventional banks focus on collateral and proper documentation procedures.
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