The threat of illegal online banks | The Guardian Nigeria News
The operation of online banks in Nigeria, which are invariably illegal, has become a source of serious concern for many Nigerians. These illegal ‘banks’, which are mostly foreign owned, especially Chinese who make up over 95% of the owners, have constituted themselves into something of a nuisance to the Nigerian economy by exploiting the vulnerability of the average Nigerian who has been severely impoverished with the onset of the COVID-19 pandemic.
The preponderance of these online banks has spelled the death knell for many indiscriminate Nigerians who have been caught up in their web of broken promises of ridiculously low interest payments for loan seekers as well as mouth-watering returns for depositors and investors. . These unhealthy developments are among the obvious fallout from the uncertain state of livelihoods in the country. Hence, the offerings of these banks have emerged as attractive investment options for unsuspecting Nigerians who have apparently thrown away all ethical caution in their quest for quick gains.
In this regard, the recent crackdown on these illegal financial institutions by the Federal Competition Consumer Protection Commission (FCCPC) in conjunction with the Independent Corrupt Practices and other Related Offenses Commission (ICPC), among others, is most welcome. The raid on illegal online banks, through a court order, by these agencies in conjunction with the National Information Technology Development Agency and the Nigerian Police has tended to inject some good meaning in the sector. These online banks which operate on a large scale in the Opebi area of Ikeja, Lagos State, have allegedly breached the privacy of their customers and conducted numerous unethical financial services transactions.
The FCCPC, through its managing director, Babatunde Irukera, had alleged that the privacy of online banks was violated in debt collection activities with their adoption of the “name and shame” strategy in their operations, thus violating the ethics of how lending is generally done. Other findings that indicate that many of these banks are operated by the same person and are not registered with the Corporate Affairs Commission, among others, are quite disturbing.
Other issues related to this imbroglio are just as worrying. Loan applications from banks are presented as having minimal interest and with the possibility of paying in the short term. Naturally, given the high level of poverty in society, people are generally attracted by the expected quick wins. Eventually, many end up being trapped in the scheme. Of course, in case of default, the “name and shame strategy” is applied.
Usually this is related to the phone log of their interaction with their customers aimed at defaming the defaulters. The operation of these banks has now become a misnomer as it has begun to involve high-ranking members of society, including Federal Republic Senators. With the increasing poverty rate in the country, in many cases people are borrowing for their consumption. Many people who access the fund often do so with no intention of reimbursing or robbing one applicant to pay another. These are people who do not live within their means.
One way out of this mess is to continue the action taken by the FCCPC by following the legal option to solve the problem and get unscrupulous Chinese businessmen to book. These people take advantage of the very low interest rate of around 5% in their home country and sell it to unsuspecting Nigerians at much higher rates. Currently, the FCCPC should follow up on the bill pending in the National Assembly in this regard. Furthermore, depository banks can be drawn into this battle, to freeze the accounts of illegal online banks in order to deter future expansion of illegal activities. Also, since these banks use application software (Apps) in their operations, multinationals such as Google and Apple can be approached to improve the closure of these applications. Finally, people should live within their means and stop borrowing to buy things like high-profile cell phones and other not-so-essential items for day-to-day sustenance.