Fintech and Data Privacy Invasion: Legal Implications (– Sokoloan as a Case Study)

The borrower is servant to the lender

Abstract

Today, a lot of people tend to borrow money to make ends meet and for unexpected expenses and this is most times as a result of non-payment of salaries, unemployment, high living standards, etc.

Although, traditional banking makes acquiring a loan hard with its paper work, checking the credit-worthiness of potential borrowers, requirement of a guarantor and collateral, the Fintech space has taken a new dive from this traditional method for obtaining a loan to make the process less stressful and more attractive by the removal of collateral for borrowers and the convenience of obtaining loans with just a few clicks on your mobile phone amongst others.

Unfortunately, this new development may have seemed rosy in its early stage, but has now become people’s worst mistake owing to its grave disadvantages such as infringement of data privacy.

This paper seeks to succinctly give a brief overview of Fintech, data privacy and its importance and take a look at the credit tech which involves loan sharks who have used their power over borrowers to bring nothing but shame upon them with their own data, specific reference to the Soko Loan app.

Key words: FINTECH, LOAN APPS, SOKO LOAN, DATA PRIVACY.

Introduction

Technology is growing and cutting across various sectors in the country such as education, the legal profession and most especially the financial space. Technology is playing a pivotal role in the finance space, helping with financial intelligence, financial inclusion, savings, investments etc.

This development is what is popularly known as “Fintech”, it is the combination of advanced technology and finance to better the lives of the citizenry by making financial transactions more convenient than the traditional way.

Financial technology (Fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes, and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smart phones. Fintech, the word, is a combination of “financial and technology”.((here accessed on 26th of March, 2022))

There are various Fintech sectors such as Credit tech for loans, Insure tech, payment tech for remittance and also wealth tech for automated savings and investment, but for the sake of this article our focus will be on credit tech.

Credit tech is a technology company that provides loan facilities in a faster and more customized way to suit the current low income amidst Nigerians. Some of these companies include; renmoney, pagefinancials, branch, soko loan, fair money and a host of others.

Data Privacy

Data Privacy is the protection of personal data from those who should not have access to it and the ability of individuals to determine who can access their personal information. It generally means the ability of a person to determine for themselves when, how and to what extent personal information about them is shared with or communicated to others.((here/ accessed on the 26th of March, 2022.))

This personal data includes name, address, email address, bank details. With the rise of internet activities, the importance of data privacy has increased as most websites and apps, especially fintech apps which require very private information like BVN, phone number, email address etc.

The government envisaging the importance of data privacy in the internet space made provision for this right as seen in Section 37 of the 1999 Constitution of the Federal Republic of Nigeria which states, “The privacy of citizens, their homes, correspondence, telephone conversations and telegraphic communications is hereby guaranteed and protected.”

Asides the aforementioned provision of the Constitution there is no specific statute or law on data privacy, however, the NITDA((National Information Technology Development Agency)) which is a federal agency established by the NITDA Act responsible for the development, regulation and advice on information technology in the country brought to life the NDPR [Nigeria Data Protection Regulations] 2019 to promote data privacy and curb data privacy breach in the country by sanctioning defaulters.

Soko Loan – Case Study

Soko Lending Limited [Soko loan app] is an online credit tech company that provides short-term loans in Nigeria to help cover unexpected expenses and urgent cash needs without collateral.((www.sokoloan.com))

It offers a seamless process by just downloading the application on one’s device and activating a direct debit in the company’s favor and gains access to the borrower’s contacts.

The fact that this loan company and most, if not all fintech lending companies do not ask for collateral before approving a loan application is what attracts Nigerians to it and takes them away from traditional bank loans. These loan apps take higher, ridiculous interest than our banks for an even shorter period, imagine asking for a 50% interest in 7 days, they clearly already set them up not to pay back.

There’s nothing for these online lenders to hold on to offset debt in cases of non-payment by defaulters since there is no collateral thus they resort to the unhealthy and illegal means of using customers private information against them by sending defamatory messages to everyone on their contact lists.

For better visualiation, this is a message sent by them to one of their borrowers contacts “This is to inform the general public that Mr. Ade with 080xxxisachronic debtor and a fraudster. He is on the run after duping a lending money company. You are advised to stay clear from him”.

Following several launched complaints at the agency, in November 2021 the NITDA fined Soko loan to the tune of Ten million naira [N10,000,000] for breach of data privacy due to their unhealthy and illegal means of debt recovery.

The agency found them in violation of various sections in the NDPR of which includes Section 2.5 of the NDPR which makes it compulsory for every business to have and display a valid privacy policy if such business collects data to the targeted data subjects in an easy to understand manner.

Privacy Policy

Privacy Policy is a document that explains the type of personal information that your business collects through your website, mobile app or other means, it also informs your customers and users of their data privacy rights and the steps you take to protect their personal information, amongst other things.

Also, they were found In breach of Section 2.2 of same rule which makes provision for lawful processing of data i.e. when processing of data is deemed lawful for example the data subject consented, the processing is required for compliance with a legal obligation to which the controller is subject inter alia.((www.nitda.gov.ng))

It is my humble opinion that any of the so called loan sharks cannot find shelter under the umbrella of initial notice that they would send messages to third parties as Section 24.4 states no consent shall be sought, given or accepted in any circumstance that may engender direct or indirect propagation of atrocities, hate, violation, criminal acts and anti-social conducts, meaning they ought not to even seek such consent in the first instance and if the data subject offered they are mandated to refuse such offer as defamation is both a civil and criminal act.

It is unfortunate that even after the fine imposed, in January of 2022 another victim of this unethical strategy although in another form took to social media to display an obituary poster made of him by SOKO LOAN due to non-payment of loan obtained.((here accessed on March 31st, 2022.)) This company sends these messages to everyone on the contact list not caring the implications of their actions.

A lot of persons have cried out that they lost a friend, sister, husband due to these messages, it may mean nothing to them but is definitely harmful to the debtor. Being a debtor is not something anyone is proud about talk more of an alleged criminal which they paint some of them to be. It causes a lot of mental issues due to shock and what not.

Fortunately, the battle did not end there, on the 11th of March 2022, the Federal Competition and Consumer protection commission [FCCPC] and other regulators including the CBN, NITDA etc. took off to shut down locations of some of these notorious illegal lending companies in Lagos state.

It was discovered that they were not even registered with the Corporate Affairs commission neither did they obtain the requisite licenses to carry out the business of lending in Nigeria.

The reason for the raiding was due to the issue of breach of data privacy as a means to recover due loans and also the high interest rates. The loan companies shut down by the federal agencies included a familiar face Soko loan, alongside kash kash, easy credit etc. The FCCPC mentioned that efforts are being made to freeze the accounts used by the managers of the online money lenders, also it was just the beginning in due time they would fish out all other illegal money lenders.((here/ accessed on April))

Recommendation / Conclusion

The best way to tackle the issue of non-payment is a preliminary move of making a loan grant subject to collateral considering the fact that Nigerians have bad credit score. If that is not welcomed, then they take the prescribed means of debt recovery by the relevant extant law, in other words hire a lawyer versed in debt recovery to do the work, as simple as that.

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Written by Tariere Itoko

Tariere Itoko is an enthusiastic 300 level law student at Edo State University, Uzairue with great  interest in Fintech law, Intellectual property law and Banking and Finance.