The Federal Competition and Consumer Protection Commission (FCCPC) has approved the operations of three (3) of our clients and 91 other companies as digital money lenders in Nigeria. Recently, the FCCPC came up with the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending for the regulation of digital loan companies in a bid to promote fair, transparent, and beneficial alternative lending opportunities for Nigerians.
Despite some stakeholders’ concerns regarding the double regulation of digital loan companies and the attendant costs that the FCCPC’s Guidelines has foisted on digital loan companies in Nigeria, the FCCPC is insistent on the compliance with the mandatory registration of digital loan companies with the FCCPC. Although the FCCPC extended the deadline for registration to 31st of January 2023, the attendant costs of completing the mandatory registrations continue to discourage full compliance.
The arguments on the other side around double regulation and costs can be summarized as follow:
- Digital Loan Companies are licensed and regulated by States rather than Central Bank of Nigeria or any agency of the Federal Government of Nigeria (FGN);
- The State Government has a corresponding Consumer Protection Commission which has similar mandates and functions covering individuals and State-licensed entities. These powers are similar to those of the FCCPC which is expected to focus on FGN-licensed institutions only in line with the country’s constitutional and jurisdictional demarcations;
- Though the FCCPC registration is free but there other ancillary registrations which the FCCPC Guidelines has introduced as condition precedent to obtaining the FCCPC approval. The requirements and processing of these ancillary registrations are done by licensed practitioners who charge separate fees, for instance processing of data privacy report from the National Data Protection Bureau (NDPB). This has increased the cost of start up and running of loan business in Nigeria;
- The incursion of FCCPC in the regulation of money lenders will soon create serious legal battles in our courtrooms that are similar to those currently experienced between the National Lottery Regulatory Commission (NLRC) and the various States’ Lotteries Boards over gaming/betting regulation in Nigeria, or between the Nigerian Inland Waterways Authority (NIWA) and the Lagos State Waterway Authority (LASWA) over the regulation of inland waters within Lagos State, or between the FGN and the States’ Governments over the collection of Value Added Tax (VAT) under the VAT Act of the FGN and the equivalent Sale of Goods Laws of the States, just to mention a few; and
- Nigeria is in need of alternative credit lines for the teeming population and, therefore, must adopt corrective measures against non-compliant loan companies rather than stifling investment or entry opportunities for new loan companies through unfriendly regulatory frameworks.
At the moment, the payment companies in Nigeria like Paystack, Flutterwave, Monify etc., acting under the directives of the FCCPC would refuse to collaborate with a digital loan company unless such loan company has obtained the approval of the FCCPC.
The FCCPC’s Guidelines require digital lenders to register with the FCCPC and complete two forms (Form DLG 001 and Form DLG 002). Form DLG OO1 is the registration form that requires the applicant company to provide identification and operational information to the FCCPC, while Form DLG 002 contains declarations relating to:
- Legitimacy;
- Compliance with applicable regulatory requirements;
- Lawful source of funds and conformity with anti-money laundering; and
- Data protection laws.
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