14 February 2024 07:21 am
Leasing and debt installment payers voiced concerns over Central Bank’s silence regarding the questionable practices of unregulated online loan providers in Sri Lanka.
Under the banner ‘Association of Leasing and Debt Installment Payers (ALDS)’, the group asserted that borrowers have no legal obligation to repay loans obtained from these unauthorised online lenders.
“Despite numerous complaints passed over to the Central Bank (CB), there has been no response, leading to suspicions that CB officials may be benefiting from these institutions,” ALDS Deputy Secretary Asanka Sumedha Amarasingha alleged during a press briefing in Colombo recently.
According to Robocash which is rebranded as UNA Financial, the user base of Sri Lanka’s digital lending services have seen a 125-fold increase from 10,600 users in August 2021 to a staggering 1.3 million by November 2023.
Online payday loan providers using social media promotes advertisements offering instant cash loans online within 5-15 minutes, but with sky-high interest rates and high late fees.
Several recent incidents brought attention to illegal collection practices of some of online lending providers.
Amarasingha noted that these loan providers often harass borrowers, their family members and employers on a regular basis as part of their collections practices.
“Despite numerous complaints passed over to the Central Bank (CB), there has been no response, leading to suspicions that CB officials may be benefiting from these institutions” - ALDS
According to Cyber Crime Unit of the Criminal Investigation Department (CID), some online loan providers collect highly sensitive personal information of borrowers through a link sent to their mobile phones and use such information to harass, insult, and threaten borrowers if there is a delay or non-payment of loans.
Amarasingha claimed that unregulated online loan operations remain illegal in the country. Therefore, the Association advised the public who have obtained online loans from such unregulated online lenders, are under no obligation to repay such loans, although they may choose to do so.
Six online lenders operating in Sri Lanka have formed Digital Alternative Lending Association (DALA) as a company limited by guarantee under the Companies Act No. 7 of 2007 (No. GA00244823) to promote and protect the digital lending business in Sri Lanka. The Association published DALA Code of Conduct for self regulation of the sector.
According to the Association, its members employ more than 400 people with a customer base of over 750,000 Sri Lankans.
The government is planning to establish a Credit Regulatory Authority under the Microfinance and Credit Regulatory Authority Bill to regulate non-deposit taking lending institutions including as digital lenders.