The Federal Competition and Consumer Protection Commission (FCCPC) is taking steps to develop a new regulatory structure to address the growing problem of increasing debt to online lenders, commonly known as loan apps. The Commission’s Chairman, Mr. Babatunde Irukera, revealed this during a recent live program on TVC. Irukera emphasized that the debt problem to these loan apps has significantly worsened and is now a burning issue in the industry. Despite the Commission’s progress in curbing abuses and harassment from loan apps, borrowers continue to default on their loans, leading to increased debt.
Irukera expressed concerns that the growing debt could potentially lead to the collapse of online lenders who play a vital role in the economy.
A significant observation has been made that reducing cases of harassment and defamation by loan apps has resulted in an increase in loan default rates. Irukera stressed the need to find a more ethical and appropriate way of loan recovery rather than resorting to harassment tactics. The Chairman of FCCPC believes that responsible lending and borrowing should be addressed through a broader regulatory approach, which will be introduced in 2024.
Irukera highlighted the importance of establishing a centralized credit system that would assess an individual’s creditworthiness and financial responsibility. This would help prevent access to credit by financially irresponsible individuals and promote self-regulation among borrowers. The Commission noted that a significant number of loan defaulters are using multiple loan apps.
The temporary FCCPC structure has already yielded positive results, resulting in an 80% reduction in cases of harassment and defamation by loan apps. However, the Commission acknowledges that there is still much work to be done to address the remaining 20%. As the fintech industry continues to grow worldwide, the regulatory structure for loan apps is still in its early stages of development.
In an effort to clean up the online loan market and eliminate unethical practices, FCCPC has registered over 200 loan apps under the temporary regulatory structure. This process aims to eliminate the issue of defamation and harassment of borrowers. Currently, the Commission has approved a total of 211 online lenders.
The development of a new regulatory structure is crucial to ensuring responsible lending practices in the online loan industry. By addressing the debt problem and implementing a centralized credit system, FCCPC aims to protect consumers and promote a healthy and sustainable loan ecosystem.
FAQ:
Q: What does DML (online lenders) stand for?
A: DML stands for “digital money lenders,” which refers to online lenders, i.e., companies that provide loans through mobile applications.
Q: What are the goals of FCCPC (Federal Competition and Consumer Protection Commission)?
A: FCCPC aims to protect consumers, promote fair trade practices, and combat unfair competition practices in the market.
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