Nigeria’s consumer protection regulator has unveiled new rules targeting harassment and exploitative practices in the digital lending sector, with violators risking penalties of up to ₦100 million ($65,000) or 1% of their annual turnover.

“Critically,” the statement reads, “the Regulations prohibits pre-authorised or automatic lending, compel clear and accessible loan terms, ban unethical marketing, and mandate local ownership of at least one service provider for airtime and data lending services.”

FCCPC: New rules to protect Nigerians from unethical digital lending

The Federal Competition and Consumer Protection Commission (FCCPC) says its new Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulations will protect millions of Nigerians from unethical lenders who have used abusive debt collection tactics and violated data privacy rights.

“For too long, Nigerians have endured harassment, data breaches, and unethical practices by unregulated digital lenders,” Tunji Bello, FCCPC’s Executive Vice Chairman, says in a statement seen by Technology Times. 

“These regulations draw a clear line that innovation is welcome, but not at the expense of rights and dignity of consumers, or the rule of law.”

The regulations, which took effect July 21, requires all digital lenders to register with the FCCPC within 90 days or face penalties of up to 100 million naira ($65,000) or 1% of annual turnover. Directors of non-compliant companies could face disqualification for up to five years.

Checks on the FCCPC website show 476 digital lenders have been approved and the number continues rising. Of this total, 412 have full approval, 42 have conditional approval, and 22 have been waived by the Central Bank of Nigeria (CBN), reflecting the rapid growth of mobile-based lending in Africa’s largest economy. 

However, consumer complaints about high interest rates charged by loan apps have prompted regulatory action.

The new rules ban several practices that have drawn criticism:

• Pre-authorised or automatic lending without explicit consent
• Unethical marketing and recovery methods
• Hidden fees and charges
• Harassment of borrowers and their contacts

“Critically,” the statement reads, “the Regulations prohibits pre-authorised or automatic lending, compel clear and accessible loan terms, ban unethical marketing, and mandate local ownership of at least one service provider for airtime and data lending services.”

Digital lenders must now provide clear loan terms before transactions complete and can only approve loans for borrowers who demonstrate ability to repay. The FCCPC will monitor interest rates to prevent exploitative charges.

The regulations strengthen data protection requirements and mandate that at least one service provider for airtime and data lending services must have local ownership. All partnership agreements between lenders require joint registration with the FCCPC.

“No consumer should be harassed, defamed, or lured into unsustainable debt under the guise of digital lending,” Bello says.

The rules apply to all unsecured consumer lending through electronic, online, mobile or other non-traditional channels. This includes Mobile Money Operators, Digital Money Lenders and their service partners.

The FCCPC has established a dedicated complaint portal for consumers to report violations through lenderstaskforce@fccpc.gov.ng.