Page 68 - ITU-T Focus Group Digital Financial Services – Consumer Experience and Protection

ITU-T Focus Group Digital Financial Services
Consumer Experience and Protection

A note on third party digital lenders

Another noteworthy concern relates to the rise of third party digital lenders who offer loans to customers via
mobile phone applications. Because they are not banks or mobile network operators (MNOs), they may fall
outside of current regulatory frameworks that apply to traditional lenders and, therefore, could take advantage
of this regulatory gap to engage in conduct that could be detrimental to consumers. For instance, this may mean
that these digital lenders are exempt from prohibitions on including unfair or risky contract clauses in contracts.

3 Conclusions and recommendations

Consumer contracts that were reviewed present a number of challenges as discussed above. The following
recommendations are made to address the identified risk areas:

1) Language & transparency of communications:
a. Local language contracts should be provided, especially where there is one major language spoken
in a jurisdiction besides English, e.g., in East Africa, Swahili is often stipulated as a second national
language.

b. Alternative formats, such as Braille, large print, and oral disclosures should be available for customers
who are illiterate or have disabilities, e.g., blindness.

c. The first page of agreements given to customers or a separate cover page should highlight and
summarize key contract terms, e.g., charges/fees, complaint handling process, PIN security, fraud
and funds protection, consequences of default, and dormancy period.
2) Provider obligations

a. Providers should be required to include a term in the contract requiring that customers be notified
of all changes to contract terms before they take effect.
b. There should be as many channels for providing customer contractual notifications as possible –
especially including the mechanisms through which customers interact with the provider, such as
SMS channels and agent outlets, in addition to websites and newspapers.
c. Providers should be required to include clauses on data privacy and protection in contracts, such
as what customer information is being collected, how it will be used, whether and under what
circumstances it will be disclosed to third parties including legal/regulatory requirements, the matters
about which customers can exercise choice regarding their information and how they can exercise
such choice, data security measures that have been employed, and customers’ ability to access and
correct their records.
3) Consumer obligations:

a. Take reasonable steps to avoid entering into contracts with customers who are not legally eligible
to contract, such as due to age or infirmity, and, where applicable law permits minors to enter into
credit arrangements, providers should make sure that parents/guardians have authority to terminate
such agreements and potentially have to co-sign or at least provide their consent to the agreement.
b. With regard to DFS products, consumers should be encouraged to take the time to read and
understand terms and conditions prior to accepting them. Where communications devices used by
customers do not easily permit disclosures, and instead refer to websites, creative methods should
be employed to educate consumers about the terms of agreements to avoid situations in which they
accept but are unaware of terms that are detrimental.
c. Providers should limit or end the use of outside links/URLs in agreements.

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