Central Bank Unveils Measures to Tame Unregulated Digital Lenders

Digital lenders’ predatory ways are about to come to an end following the gazetting of the Credit Reference Bureau Regulatory, 2020 (CRB REGULATIONS) on April 8, 2020. The new regulations provide for the licensing and supervision of CRBs By CBK.

In addition, the regulations provide a framework for the exchange of borrower’s credit information between commercial banks, micro-finance banks, SACCOs, and CRBs. They intend to strengthen Kenya’s Credit Information Sharing (CIS) system by enhancing consumer protection of borrowers, expand the sources of information, and bridge the gap about borrower’s creditworthiness.

The key reform introduced in the CRB regulations include:

1. A minimum threshold of Ksh.1,000 has now been set for negative credit information that is submitted to CRBs by lenders. Borrower’s information regarding nonperforming loans of less than Ksh.1,000 will therefore not be submitted to CRBs, and borrowers that were previously “blacklisted” only for amounts less than Ksh.1,000 will be “delisted.”
2. First-time CRB clearance certificates will be provided by CRBs at no charge. This is particularly beneficial to Kenyan youth and graduates who are seeking employment.
3. SACCO societies regulated by the Sacco Societies Regulatory Authority (SASRA) have now been included as authorized subscribers of credit data to CRBs. These SACCOs will now submit borrowers’ information to CRBs and also receive credit reports directly from them

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In addition to publishing these CRB Regulations, the following additional measures have
been implemented:

• With immediate effect, CBK has withdrawn the approvals granted to unregulated digital (mobile-based) and credit-only lenders as third party credit information providers to CRBs. The withdrawal is in response to numerous public complaints over misuse of the CIS by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints. Thus, unregulated digital and credit only lenders will no longer submit credit information on their borrowers to CRBs.
• On the recommendation of CBK, the Cabinet Secretary for the National Treasury and Planning has published by Gazette Notice No. 3096 of April 8, 2020, the suspension for a period of six months, the listing of negative credit information for borrowers whose loans were performing previously but have become non-performing from April 1, 2020. Consequently, loans that fall in arrears from April 1 to September 30, 2020, will not lead to the “blacklisting” of the borrower on the CRBs a move aiming to shield borrowers from the adverse impact. CBK will continue working with all stakeholders to ensure that the CIS mechanism works for and with Kenyans, and in line with best global practices.