Regulator fines Kenyan digital lender for listing guarantor without consent 

The news 

• Kenya's Office of the Data Protection Commissioner (ODPC) has fined digital lender Whitepath KES 250,000 ($2,000) for unlawfully listing an individual as a loan guarantor without consent.
• This marks Whitepath's second data privacy violation in two years, following a previous fine of KES 5 million in 2023 for unauthorised data sharing.
• The Central Bank of Kenya (CBK) has intensified scrutiny of digital lenders, reducing the number of licensed providers to 51 to curb predatory practices.

In November 2024, Dennis Caleb Owuor received an unexpected debt collection call from Whitepath, alleging he was a guarantor for a defaulted loan, a claim he refuted. Despite his denial and lack of consent, the lender persisted in its demands.

ODPC Commissioner Immaculate Kassait noted that Whitepath remained unresponsive during the investigation, leading to the imposition of the fine. This incident is not isolated.

In 2023, Whitepath faced a KES 5 million fine after nearly 150 complaints accused the lender of accessing clients' phone contacts without permission and sending unsolicited messages.

Kenya's digital lending sector has experienced rapid growth, attracting both praise for financial inclusion and criticism for unethical practices. In response to concerns over high-interest rates, misuse of personal data, and aggressive debt recovery methods, the CBK introduced the Digital Credit Providers (DCP) Regulations in 2022. These regulations mandate that all digital lenders obtain licenses to operate, aiming to protect consumers from exploitation.

The crackdown has been significant. Before the regulations, hundreds of digital lenders operated in Kenya, many without oversight. The CBK's stringent vetting process has since reduced the number of licensed digital credit providers to 51.

This move seeks to eliminate predatory lending practices and ensure that only compliant and ethical lenders remain in the market.

The enforcement of stricter regulations has led to a more accountable digital lending environment. Lenders are now required to adhere to data protection laws, ensuring that borrowers' personal information is handled responsibly. The CBK's oversight includes monitoring interest rates and debt collection practices, aiming to foster a fairer financial ecosystem.

However, challenges persist. Some lenders continue to employ unethical tactics, such as unauthorised data access and public shaming of defaulters. These practices not only violate individual privacy but also undermine trust in digital financial services.

Whitepath's repeated violations underscore the necessity for robust regulatory frameworks in Kenya's digital lending sector. The combined efforts of the ODPC and CBK aim to create a more transparent and ethical lending environment, safeguarding consumer rights and promoting sustainable financial practices.