CBK bars digital lenders from blacklisting defaulters on credit agencies

By Bernard Gitonga

Central Bank of Kenya (CBK) has proscribed unregulated digital and credit only lenders from submitting names of loan defaulters for blacklisting at the Credit Reference Bureaus (CRB).

In a statement, CBK explained that the withdrawal is in response to numerous public complaints about misuse of the Credit Information Sharing System (CIS) by the above-mentioned lenders and particularly poor response to customer response.

The key reforms introduced by these CRB Regulations include:

A minimum threshold of Sh1, 000 has now been set for negative credit information that is submitted to CRBs by lenders. Borrower’s information regarding nonperforming loans of less than Sh1, 000 will therefore not be submitted to CRBs, and borrowers that were previously “blacklisted” only for amounts less than Sh1, 000 will be “delisted.”

First-time CRB clearance certificates will be provided by CRBs at no charge. This is particularly beneficial to Kenyan 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. These SACCOs will now submit borrowers’ information to CRBs and also receive credit reports directly from them.

In addition to publishing these CRB Regulations, the following additional measures have been implemented:

With immediate effect, CBK has withdrawn the approvals granted to unregulated digital (mobile-based) and credit-only lenders as third party credit information providers to CRBs.

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. Thus, unregulated digital and creditably lenders will no longer submit credit information on their borrowers to CRBs.

On the recommendation of CBK, the Cabinet Secretary for the National Treasury and Planning has 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 on 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,” said the CBK in a statement