Eight key protections every online borrower should know

On September 3, the Federal Competition and Consumer Protection Commission (FCCPC) issued the Digital, Electronic, Online, or Non-Traditional Consumer Lending (DEON) Regulations.

Although the regulations are retroactive and came into effect on July 21, the official gazette was just released. Commenting on the regulations, Tunji Bello, the Executive Vice Chairman of FCCPC, said,

“For too long, Nigerians have endured harassment, data breaches, and unethical practices by unregulated digital lenders. These regulations draw a clear line that innovation is welcome, but not at the expense of the rights and dignity of consumers, or the rule of law.”

After a review of the regulations, BusinessDay has identified eight key protections that the regulation offers to online borrowers.

1. Full disclosure of loan terms

According to Section 17(a) of the DEON Regulations, the lenders and service providers must ensure that all terms of the lending service, including interest rates, repayment schedules, and any applicable fees, are fully disclosed to consumers before a transaction is finalised. These terms must be presented in clear, simple, and easily understandable English, free from ambiguity, misleading language, or deception.

Also, lenders are required to prominently display accurate and up-to-date information on their websites and platforms. These include lending rates and all related fees or charges associated with their consumer lending services.

2. Transparent advertising

Section 17 (e) of the regulations states that all advertisements must be clear, truthful, and easy to understand. In essence, lenders are not allowed to exaggerate benefits, hide risks, or use misleading language.

Also, lenders are required to respect privacy when it comes to marketing. They are required to follow data protection and communication laws, avoid spamming people with unwanted ads. And to give a clear and easy way to opt out or unsubscribe if people do not want to receive promotional messages.

3. Fair treatment of borrowers

Lenders and service providers must treat all consumers fairly and without discrimination, exploitation, or bias. Any changes to contracts, such as adjustments to interest rates, fees, or charges, can only be made if they are clearly stated in the original agreement. Furthermore, lenders must always act in line with the agreed terms and conditions of the consumer lending contract.

4. Ban on automatic lending

Lenders must provide credit strictly on an opt-in basis, meaning consumers must actively request and consent to any loan. Automatic or pre-approved lending is not allowed.

Before granting credit, lenders are also required to conduct proper due diligence, assessing a consumer’s financial capacity and creditworthiness to ensure repayment is sustainable.

5. Ban on exploitative interest rates

The FCCPC will periodically review interest rates on consumer lending services to ensure they are fair and not exploitative. This oversight will be carried out in line with established guidelines under Section 163 of the FCCPC Act, to protect consumer interests.

6. Complaint resolution within 24 hours

Lenders and service providers must resolve consumer complaints within 24 hours of receipt. Where immediate resolution is not feasible, they are required to clearly communicate the expected timeline, which in all cases must not exceed 48 hours.

7. Right to seek redress from FCCPC

According to Section 26 of the regulations, Consumers whose rights are violated under these regulations have the right to seek redress through the Commission’s established complaint resolution mechanisms.

8. No forced product bundling

Lenders and service providers must not compel consumers to use lending services as a condition for accessing other products or services. This is except in cases where the services are directly linked or dependent.