The Central Bank of Kenya (CBK) has introduced new regulations that significantly increase compliance fees for non-deposit-taking credit providers (NDTCPs). According to the regulations published by CBK Governor Kamau Thugge, NDTCPs that fail to pay the annual fee by December 31 of each year will be fined Sh1 million. This fine was not included in the earlier draft regulations published by the apex bank last year.
The CBK has set an application fee of Sh100,000 for both licensing and registration of NDTCPs. Licensed entities will pay Sh500,000, while registered ones will pay Sh250,000. These fees represent a steep increase from the previously applicable fees under the Digital Credit Providers (DCPs) regulations, where the application fee was Sh5,000 and the annual fee was Sh20,000. The new regulations follow amendments to the CBK Act, which aim to clarify and widen the scope of operations of NDTCPs.
The new regulations place a strong emphasis on consumer protection, with the CBK setting tough terms on key areas such as credit terms and handling of personal information. NDTCPs are required to formulate a credit policy consistent with the Act, aligned to their size and the nature and complexity of the products offered. The credit policy must be approved by the CBK before introducing new products or varying existing ones, including interest rates.
NDTCPs proposing to change product features or interest rates will have to justify the variations and notify their customers of the planned changes at least 30 days before they take effect. The CBK requires credit firms to provide a unique identifying account number issued by a mobile money operator for disbursements and repayments of loans. They must also provide information on app-based platforms and bank accounts to be operated.
The regulations also require NDTCPs to make provision for unsubscribing or opting out from services, including receiving marketing messages upon full repayment of the loan. The CBK has set limits on what NDTCPs may recover from customers with respect to non-performing loans. The regulations aim to enhance consumer protection and ensure that credit providers operate in a fair and transparent manner.
The CBK's new regulations are part of a broader effort to strengthen the regulatory framework for NDTCPs, formerly known as Digital Credit Providers (DCPs). The amendments to the CBK Act and the new regulations are expected to promote a more stable and secure financial system in Kenya. The CBK has been actively working to enhance oversight and regulation of the financial sector.
The implementation of the new regulations is expected to have a significant impact on NDTCPs operating in Kenya. The increased compliance fees and stricter regulations may lead to consolidation in the industry, with smaller players potentially struggling to meet the new requirements. However, the regulations are expected to promote a more stable and secure financial system, which could ultimately benefit consumers and the broader economy.
Key points
- The Central Bank of Kenya has set a Sh1 million fine for late payment of annual fees by non-deposit-taking credit providers.
- The new regulations place a strong emphasis on consumer protection, with tough terms on credit terms and handling of personal information.
- The regulations aim to enhance consumer protection and ensure that credit providers operate in a fair and transparent manner.
