A Look at the FCCP’s Limited Interim Regulatory Framework and Guidelines for Digital Lending, 2022

INTRODUCTION

Digital lending or borrowing or grant, is a type of credit procurement that allows people to apply for and take credits from online mediums without visiting a physical bank or financial institution. This method allows borrowers to start and finish the whole credit application, receive the money, and make repayments online. This type of borrowing has gain wide acceptation and usage in the 21st century in Nigeria, Africa, and the world at large, especially amidst tech-savvy credit takers, who appreciate the limberness and pliability it comes with. Digital borrowing has gone phenomenally viral with the aid of smart phones and modern devices.

However, these online transactions in Nigeria are now regulated by strict statutes which protect consumers and the financial institutions in their course of operation. The Federal Government of Nigeria, through the Federal Competition and Consumer Protection Commission (FCCPC) in 2022, implemented policies that checks economic activities, track and prohibit damaging transactions between the consumer and the market seat. It also is the regulatory framework in which the Federal Competition and Consumer Protection Act[1] is administered and enforced. Also, the Consumer Protection Council Act[2] (as implemented) is a regulatory framework with the aim of promoting and protecting the interest of consumers on all goods and services. It is vested with the authority to eradicate the penetration of illegitimate goods and low value products from the market.

ANALYSIS OF THE REGULATION/ FRAMEWORK AND PROCEDURE

By virtue of sections 17, 18 and 163 of the FCCPA, 2018 and in furtherance of this, and under the FCCPC’s 2022 Guidelines, digital borrowers are authorized to complete the application for approval in three parts and are also mandated to download and complete the Interim Digital Lending Guidelines Form 001 which is the first step to furnishing details and descriptive notes on the division and nature of information required for the application. The second step is to attach the following documents:

1. Certified copy of the applicant’s certificate of incorporation.
2. Description of applicant’s business and groups.
3. Organizational structure showing key players and designations.
4. Particulars of business correspondent.
5. Proof of professional association membership.
6. Proof of service agreements with providers.
7. Proof of feedback and compliance resolution model.
8. Proof of tax.
9. Every applicable fee related with the service provided; and
10. A properly signed and executed FCCPC INTERIM DIGITAL LENDING GUIDELINES FORM 002.
11. Declaration for Digital Lending Businesses in Nigeria.

The third and last stage is a declaration form for two Directors to append their signatures proving that the details an applicant has supplied is accurate and that his business is in tandem with all legal stipulations. This is to confirm the legitimacy, lawfulness, and compliance with applicable legislations such as the FCCPA, the anti-money laundering regime with respect to third parties and the Nigeria Data Protection Regulations 2019 (NDPR) and such other related principles of lending as well as recovery methods consistent with digital money lending practices.

AREAS OF DICHOTOMY BETWEEN THE FCCPC’s REGULATION AND EXTANT LAWS

The lighting of the FCCPC’s Interim Guidelines, 2022 raised dissensions due to the incongruence between the provisions of the FCCPA and the Banks and Other Financial institutions Act (BOFIA), 2020.[3] A reproduction of the provision of section 104 of the FCCPA reads: “Notwithstanding the provisions of any other law but subject to the provisions of the Constitution of the Federal Republic of Nigeria, in all matters relating to competition and consumer protection, the provisions of this Act shall override the provisions of any other law.”Notwithstanding, section 65 of BOFIA provides thus:

The provisions of the Federal Competition and Consumer Protection Act shall not apply to-

1. any function, act, financial product, or financial services issued or undertaking, and transaction howsoever described by a bank or other financial institutions licensed by the Bank.

Flowing from these provisions, it is crystal clear that there exists a dichotomy between the reproduced sections of the BOFIA and FCCPA.

However, it is trite law that where there appears to be a conflict between a general statute and a specific statute, the special statute shall prevail as held in the case of Independent Television and Radio v. Edo State Board of Internal Revenue[4]. It can hereby be seen that more credence is giving to the special legislation as against the general one. It is hereby affirmed and submitted that BOFIA is a special statute that relates to financial organizations only and thus by law takes precedence over the FCCPA.

Furthermore, the law is clear on which legislation takes precedence between a former and latter legislation where there exists conflict between both as held in the case of Ziza v. Mamman[5] where the Court of Appeal held that:

Where there is a conflict between an earlier and a latter provision in an enactment, the latter provision of the enactment supersedes the former provision. This is Moreso where the latter provision is specific.

It was also held in the case of Crownstar Co Ltd v. The Vessel Mv Vali[6] and the case of Attorney General Anambra State v Attorney General Federation[7] that:

Where there is a conflict between a previous statute and a later one the rule is that the later one should be preferred, subject to the first duty of the court, if the result is fairly possible to give effect to the whole expression of the parliamentary intention….”

Against the backdrop of the foregoing, it can be reasonably deduced that BOFIA is the most recent of the two conflicting laws and as such, should take precedence and it is a specific legislation as it provides for the regulation of banks and other financial parastatals where digital money borrowing resides. Therefore, BOFIA should by the reasons adumbrated, take priority over the FCCPA.

The dilemma created following the FCCPC’s limited Interim Regulatory/Registration Framework and Guidelines for Digital borrowing, 2022 is still lingering and is not resolved. While FCCPC’s mandate is to curtail the excesses of some digital lending companies whose nonchalant abuse of product consumers is staggering, it is firmly believed that both the FCCPC and the Central Bank of Nigeria ought to combine resources and curtail the confused negative ideology about the activities of digital borrowing in Nigeria. Furthermore, while it is being argued that the FCCPC has no regulatory authority over financial organizations and digital borrowers as provided by section 65 of BOFIA, it is requisitely submitted that the Interim Regulation would apply to digital money borrowers who are not licensed by the Central Bank of Nigeria and merely carrying out business with the Money Lenders License issued by the states.

By history, the lending market is understood overtime to be under the regulation of the CBN, even though some areas of the management of banks and other financial
institutions may require additional regulatory surveillance from other regulators. An example is the National Information Technology Development Agency (NITDA) which regulates the processing of personal data by banks and some financial institution, but it does not in any guise bring lending business under its regulatory purview. Similarly, the Nigerian Communications Commission (NCC) governs the holocaust of banking services such as the use of Unstructured Supplementary Service Data (USSD) to gain access to lendingplatforms. However, it does not regulate the offering of lending enterprise. Under the circumstances, the expectation is that the FCCPC intends to embrace a collaborative regulatory approach in the aspect of digital lending with the Central Bank of Nigeria so that both consumer protection and financial aspects of digital lending aspects are blanketed.

CONCLUSION

As endorsed by Google, to operate as a digital money Lender, one must conform to the models laid out by the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, 2022 as may be amended between intervals by the Federal Competition and consumer Protection Commission (FCCPC), Nigeria. Digital Lenders must also provide a traceable approval note obtained from FCCPC. Loan collectors on the other hand, are expected to supply certification for their digital lending enterprise, as well as details for every partnership with other money lenders. And lastly, a digital lender must supply all necessary information or documentation to showcase his compliance with the regulatory and licensing stipulations that are needed to foster operations and management.[8] These are all in a bid to curb marauding lending schemes and to protect the sanctity of money lending practice in Nigeria. Also, note that as a business that provides digital lending services to customers in Nigeria, obtaining approval as soon as possible remains absolute because the approval shows compliance with the FCCP’s framework and further indicates that your business is compliant with the FCCPC’s framework.

Lastly, this regulation will serve as a saving tool to the controversies that has fluttered around the digital lending field in recent times which has become a frightening dilemma for both customers and regulators owing to the lay and unprofessional standards employed by most digital lenders in their loan recovery schemes. These includes social shaming, breach of data privacy rights, stringent lending terms, criminal defamation, threat to life, etc.

[1] FCPA 2018.

[2] Cap 25, 2004, LFN

[3] BOFIA Act, Cap. B3, Laws of the Federation of Nigeria, 2004.

[4] (2015) 12 NWLR (PT. 1474) 442

[5] (2002) 5 NWLR (Pt. 760) 243

[6] (2001) 1 NWLR (Pt 639) 37

[7] (1993) 6 NWLR (Pt 302) 692 at 713 – 714 referred to (P. 62, paras. B-D)

[8] From <https://www.legit.ng/business-economy/money/1529353-google-introduces-restrictions-digital-loan-apps-days-fg-approves-117-serve-nigerians/> (accessed on 17th April, 2023).