Season of Shylock lenders: Micro-loan companies launch attacks on borrowers’ reputation to recover debts as more cash-trapped Nigerians take advantage of lending firms – Punch Newspapers

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Joshua Madubuike was going through a rough financial patch that most adults living in Nigeria could  relate with. He needed money urgently to solve a pressing need. He had reached out to the people around him but everybody was equally having a tough time. Though it was relatively a paltry sum, his efforts to raise the sum were to no avail. This was in 2020, during the COVID-19 pandemic.
Prior to this period, Joshua has been hearing about a particular micro-loan company (name withheld) and decided to give it a trial. He went on to Google Playstore and downloaded the mobile app of the micro-loan company.
The app required him to fill out some information including the day he intended to repay the loan, which he did. In few minutes, the loan of N10,000 had dropped into his bank account.
The due date for repayment of the loan came and for some reasons, Joshua had not got the money to pay back the loan and the interest charged. On that very day, he received a call from the customer care agent of the company threatening him that the firm would call and send messages to everybody on his phone’s contact list if he failed to pay up on that date.

He told our correspondent during an interview “ I thought it was all a joke, not until the next day when I started getting calls from friends asking me what was going on and whether I had borrowed money from anyone. They said some persons had called them and sent them messages labelling me as a fraudster and a criminal that must be avoided. It was so embarrassing.
“Just a day passed and my contacts already knew I was in a little debt. It was such a terrible experience,” he said.
He took the pain to explain what transpired to everyone that called him. Luckily for him, these were persons that had known him for quite some time and could vouch for his integrity.

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Eventually, he repaid the debt and deleted the app from his phone, but that was after he had expressed his grievances and told them how wrong their debt recovery procedures were.
Joshua only got to explain to the handful of people that called regarding the issue. To the many others on his contact list, he never got the chance to clear his name.
Maureen Eugene recounted how she had received these messages from micro-loan companies twice. She stated that the first time she received the message, the identity of the person was not familiar to her, so she ignored it.
However, the second time she received the message, she was angry because the person concerned was a very close friend of hers.
“I know her very well. She is not a criminal as they tagged her. The message was sent to me via Whatsapp and the sender went offline immediately. I think the sender works for the company because the message mentioned the name of the company.
In the message, they said that she took money from them and that she is a criminal. Her name and phone number were included in the message. I felt very bad about it. I don’t know the number of persons that would have also received that message.
“It broke my heart and I felt that they were soiling her name, painting her as a criminal. When I reached out to her, she told me that I was not the only one that has reached out about the issue and that some of her friends have been reaching out to her too.

“She said she had just borrowed money and because she had not been able to meet up with the payment, the company started broadcasting messages to everyone that she was a criminal,” she added.
Eugene described the approach used by these new micro-loan companies to recover loans as a wrong approach to the problem. She asserted that there are better ways for these money lending companies to recover their money from defaulters, rather than assassinating people’s character and tarnishing the reputation that they have built over the years.
Lawyers speak on the loan recovery approach
A Lagos-based legal practitioner, Precious Ukusanjuya, told our correspondent that a former church member of hers had called her in 2020 to complain about messages that were sent by these soft loan companies.
Ukusanjuya asked him to forward the messages to her and the phone number of the customer care agent that he has been interacting with. When Ukusanjuya called the customer care agent, she confirmed that the messages were sent by the company and she further threatened that they were going to also publish it on social media.
That same week, another person also called Ukusanjuya for the same issue. Then it occurred to her that there were others who were also suffering from the same problem.
The legal practitioner had to put up a video on her YouTube Channel to educate people on what it entails to obtain loans and talked about the rights of those obtaining these loans. She also drew attention to the infringement on people’s rights by these micro-loan companies.

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She also created a Whatsapp group for those who had similar complaints about these micro-loan companies and a good number of people joined her Whatsapp group.
However, according to her, “an average Nigerian does not want to carry on with a lawsuit. They just chickened out.”
She recounted that she also spoke with one of the branch managers of one of the loan companies on the same issue and he apologised. The branch manager told her that this approach was the fastest and easiest way to recover their money from the loan defaulters.
“These companies are giving out loans, charging interest on the loan and also have default fees attached to it. Default fees simply means that they expect that people are going to default and they are charging them not just the interest accrued but also default fees. Then, they are still going ahead to defame them, it doesn’t even make sense.
“As a company into the business of money lending, there are rules and laid-down procedures on how to recover their money. They can go to court, discredit the defaulters, reach out to their next of kin or persons that signed as guarantors. They can do all of that but they cannot send random messages to people and call them criminals,” she said.
Talking about the current case she was handling, Ukusanjuya expressed her excitement that  her client was ready to pursue the matter to its logical conclusion.
Ukusanjuya’s current client had been interacting with the representative of the company and she had informed them that she just had a baby and was having complications. She explained to them to give her two days and she will pay up.

“Within two days, the new mother tried to pay the money on the app but there were network issues on the app and the payment did not go through. Before she could say ‘Jack Robinson,’ her husband called her to inquire about the message he had just received which stated that she is a fraudulent person who ran away with the company’s money and the police are after her.
“They put her full name and phone number, so it was so clear and direct that she was the person being referred to. Others also called her, they screenshot the message and sent it to her.
“For a woman who just left the hospital and had complications, she was traumatized.
“I told her that I won’t tell her not to pay the money before we file a lawsuit because the default fees and interest would be accumulating everyday. I advised her to pay up and get all the pieces of evidence that she can lay her hands on and then we will take it up legally,” Ukusanjuya narrated.
She explained that her law firm wrote to the company but realized that it was so difficult locating the company or its representatives.
“It is very difficult to locate these soft loan companies. A lot of them are foreigners. It is a digital business. So, they just try to get a director in Nigeria, somebody that will act as a director for the purpose of registering that company. Immediately they register the company, they are off physically. You cannot pin them to a particular location. They are totally online.
“Filing a lawsuit against them takes a lot of intelligence and due diligence to be able to file a lawsuit against their legal names. The name they have on their app is not their legal name, it is only a brand name. So you need to actually discover the company that gave birth to the brand that is giving out loans to people,” she said.

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For Ukusanjuya’s client, the broadcast message caused her husband to lose his job. The contacts of her husband were on her phone and the contacts all received the message. Also, the client was turned down for a job which she had already secured but was yet to resume.
“Her husband lost his job and the lady upon resumption was denied hers after they all received the message,” Ukusanjuya narrated.
Another legal practitioner, Bariwere Banyie, who also condemned this approach for loan recovery, stated that there are clearly defined procedures for loan recovery in law.
According to her, the company should use legally recognized means to recover their loans rather than tarnishing the image of their clients.
“The legal means that loan companies are supposed to explore include sending a letter of demand to the debtor. Where the debtor fails to pay up, they can now go to court to recover the debts. It is not by sending messages to people that know nothing about the transaction and defaming the person in the process.
“There is a basic rule of contract that states that parties are free to contract in the ways they want to, as long as it does not infringe on the rights of other persons and as long as it is not illegal. The mere fact that certain terms are contained in the terms and conditions on their mobile application does not make it right.
“When you say you will broadcast to the people on their contact list, ordinarily it shouldn’t be a problem because in some cases the clauses are in the terms and conditions and have been agreed by the parties. But when you start sending messages to other people, disturbing them and intruding into their privacy when they are not parties to the contract, it becomes a problem.

“When you bombard me with messages that someone I know is owing you, you are invading my privacy, and every Nigerian has the basic right to privacy. Your right ends where the right of another person starts,” she asserted.
Banyie also stated that  the mere fact that a person took a loan and defaulted in the repayment does not make him a criminal.
“The mere fact that a person takes a loan and defaults to pay does not make the person a criminal. Taking a loan is a civil transaction. In a contract, it is often contemplated that either of the parties may default. That is why the law of contract provides for damages where there is a breach of the contract. That is basic.
“Where the person defaults, it does not make him a fraudster or criminal, unless at the point of taking that loan there was a fraudulent misrepresentation. When that fraudulent misrepresentation is proven, that is when you can say that there was a criminal intent. Even at that point, it has to be a court of competent jurisdiction that will determine if the act was criminal. If a court of competent jurisdiction has not declared that, then stating so would amount to defamation.
“You cannot tag a person a criminal when the person has not been convicted by a court of competent jurisdiction. At best, what you can do is to allege and when you allege, you have to go to the appropriate quarters to make such allegations.
“Issues of debt recovery is not even a matter for the police. The courts have held that the police are not debt recovery agents. Their business is with crimes and not civil issues,” she argued.
According to Banyie, the fact that a person borrows money does not necessarily mean he/she is poor or downtrodden in the society.

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“People borrow funds for different reasons. Sometimes, people borrow money to add to what they have for a particular project. People borrow money, banks borrow too.
She lamented the impact these messages would have on the person involved considering the calibre of people that everyone has on their contact list.
“There is an impact on the person’s reputation when everybody they know receives these messages from the loan companies. There is the psychological impact. When the person came to borrow funds, the person came to you. Apart from the government, I don’t think anybody would come to you to borrow money and would want you to make it public. There is supposed to be privacy to the transaction.
“Imagine the damage that is done to the reputation and relationships that the person has built over the years. When you label the person as unreliable, a criminal, and fraudster and you send to everybody on the person’s contact list, if the person is an employee, he would lose his job when his bosses receive such messages. People would lose contracts and business deals when their business partners and clients receive those messages.. They would also lose their social relationship, especially in Nigeria where people are so judgmental.
“The reputational damage that the person will suffer would be greater than the sum in question, which makes it worse. How then do you expect that this approach is what would help you recover the default loan?
Getting in touch with some of the micro-lending platforms
It was very difficult reaching some of the companies as the phone numbers that sent these messages were not accessible for calls.

However, the few that could be reached were rude and would hang up immediately.
When our correspondent called the rep of one of the companies (name withheld), she simply threatened that more messages would be sent out concerning the person involved.
“Another message is coming very soon. He is acting fraudulent. His money has been due for 7 days and he has not paid up.
“He would soon see his name and pictures all over social media,” she threatened before hanging up.
Intervention by relevant government agencies
On August 17, the National Information Technology Development Agency announced that it had sanctioned Soko Lending Company Limited, an online lending platform to the tune of N10 milion.
In the statement which was issued by the Spokesperson for the NITDA, Hadiza Umar, the agency stated that the sanction came on the heels of numerous complaints.

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“This action was taken after receiving series of complaints against the company for unauthorised disclosures, failure to protect customers’ personal data and defamation of character as well as carrying out the necessary due diligence as enshrined in the Nigeria Data Protection Regulation.
“One of such complaints filed by Bloomgate Solicitors on behalf of its client, the data subject, was received on Monday, 11th November 2019. NITDA, as part of its due diligence process commenced investigation over the alleged infractions of the provisions of the NDPR,” it read.
“According to one of the complainants, when he failed to meet up with his repayment obligations due to insufficient credit in his account on the date the direct debit was to take effect, the company unilaterally sent privacy invading messages to the complainant’s contacts.
“Investigation revealed that complainant’s contacts who were neither parties to the loan transaction nor consented to the processing of their data have confirmed the receipt of such messages,” it added.
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