CBK now bars digital lenders from listing loan defaulters with CRBs




Kenya’s financial services industry regulator, Central Bank of Kenya (CBK) has published new Credit Reference Bureau (CRB) regulations and additional measures on credit information sharing (CIS) which bars digital (mobile phone-based) lenders from listing their clients with CRBs.

The CBK has announced that the new regulations were published in Gazette Notice No. 55 of April 8, 2020 and were issued in accordance with Section 31(3) of the Banking Act and subsequently replace the CRB Regulations of 2013. The new CRB Regulations provide for the licensing and supervision of Credit Reference Bureaus by the CBK.

“Importantly, they also provide a framework for the exchange of borrowers’ credit information between commercial banks, microfinance banks, Savings and Credit Societies (SACCOs), other credit information providers approved by CBK, and CRBs. They are now operational,” stated CBK in a release.

“The revised CRB Regulations have been developed through a consultative process that started in 2018, and are intended to strengthen Kenya’s Credit Information Sharing System (CIS) that has been operational since 2010. In particular, they seek to enhance consumer protection for borrowers, expand the sources of information and ensure the sustainability of the CIS as a key tool to bridge the information gap about the borrower’s creditworthiness.”

The new CRB regulations come with various key reforms. The new reforms introduced include: a minimum of Kshs 1,000 now being the threshold set for negative credit information that is submitted to CRBs by lenders; borrower’s information regarding nonperforming loans of less than Kshs 1,000 will from now on not be submitted to CRBs while borrowers that were previously “blacklisted” for amounts less than Kshs 1,000 will be “delisted.”

First-time CRB clearance certificates will be provided by CRBs at no charge, a move that is meant to particularly benefit the country’s youth and graduates who are seeking employment.

SACCO societies regulated by the Sacco Societies Regulatory Authority (SASRA) have now been included as authorized subscribers of credit data to CRBs. The SACCOs will now submit borrowers’ information to CRBs and also receive credit reports directly from them.

In addition to publishing the above CRB Regulations, the following additional measures have been implemented: the CBK has withdrawn the approvals granted to unregulated digital (mobile-based) and credit-only lenders as third party credit information providers to CRBs, with immediate effect. The CBK notes that the withdrawal is in response to numerous public complaints over misuse of the CIS by the unregulated digital and credit-only lenders, and particularly “their poor responsiveness to customer complaints.”

This therefore means that from now henceforth, unregulated digital and credit-only lenders – who comprise the membership of Digital Lenders Association of Kenya (DLAK) like Tala, Branch, OKash, Alternative Circle and Aspira among others- will no longer submit credit information on their borrowers to CRBs.

On the recommendation of CBK, the Treasury CS has also published by Gazette Notice No. 3096 of April 8, 2020, the suspension for a period of six months, the listing of negative credit information for borrowers whose loans were performing previously but have become non-performing from April 1, 2020. Consequently, loans that fall in arrears from April 1 to September 30, 2020, will not lead to the “blacklisting” of the borrower with the CRBs.

“This is one of the emergency measures that were announced on March 25, 2020, in light of the exceptional circumstances from the Coronavirus pandemic and aiming to shield borrowers from the adverse impact. CBK will continue working with all stakeholders to ensure that the CIS mechanism works for and with Kenyans, and in line with best global practices,” stated CBK.

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