The Money Lenders Law of various states is the primary law that governs money lending in Nigeria which provides the licensing requirements and regulations for money lenders operating within the state.
Money Lending plays an important role in the economic growth and development of Nigeria, especially in rural areas where access to credit is limited.
It is also known as a ‘payday loan’ and is understood to be a financial service that involves the provision of small loans, typically to individuals or small businesses, who may not have access to commercial banking services.
What Money Laws and Regulations Seek to Achieve
Regulation of Interest Rate
It helps to limit the level of interest rate that money lending companies can impose on borrowers which in turn protect consumers from excess interest charges and predatory lending practices.
Debt Collection
With the laws and regulations, customers interest is protected such that money lending companies will collect debt from the customer without the need to harass or intimidate customers. The laws have stipulated ways that money lending companies must engage in fair and ethical measures to receive debt.
Transparency
Money lenders are expected by the law to provide clear and unambiguous information about the loan to the customers which include but not limited to fees, payment schedule, interest rate, terms and conditions.
Business Conduct
Money lending companies are expected to abide by the laws and regulations by conducting their business responsibly and ethically.
Consumer Protection
The Laws often incorporate consumer protection measures to safeguard borrowers’ rights and prevent unfair practices by money lending companies.
Key Governing Laws and Regulations
One of the aims of laws and regulations governing money lending companies in Nigeria is to indulge healthy practices and protect the interest of the borrowers.
Companies and Allied Matters Act (CAMA)
This is the first law regulating money lending companies in Nigeria is CAMA. The law mandates anyone seeking to carry on any business activities in Nigeria to achieve registration promptly.
Central Bank of Nigeria Act
The Central Bank of Nigeria (CBN) is the most important regulatory body for financial institutions in Nigeria. Central Bank is given the authority by the Act to regulate money lending activities, set interest rates, and enforce compliance with regulations.
Money Lenders Law of various states
This is the primary law that governs money lending activities within the various states. The law sets out the licensing requirements and regulations, maximum interest rates, and process of debt recovery, for money lenders operating within the state. The moneylender law of various states stipulates that any person who wishes to carry on the business of moneylending must obtain the moneylending license from the appropriate authority.
Nigeria Data Protection Regulation
Moneylending companies are by this Regulation required to file an audited report through a licensed data protection compliance organization (DPCO) before they can legally carry on their business. The DPCO must be certified in data science and cybersecurity.
Federal Inland Revenue Service (Establishment) Act
The law establishes the Federal Inland Revenue Service (FIRS), which is the primary government agency responsible for company income taxation and compliance in Nigeria. The money lending companies are liable to pay company income tax (CIT), which is 30% of their profits provided such a company has a turnover exceeding NGN100 Million per annum. The CIT is 20% if the company does not meet such a threshold.
Federal Competition and Consumer Protection Act (FCCPA)
The FCCPA established the Federal Competition and Consumer Protection Commission (FCCPC), which is responsible for protecting the rights of consumers in relation to financial services. The Council has the authority to investigate complaints, enforce compliance with regulations, and impose sanctions on financial institutions or moneylenders that violate consumer rights. The Commission also directed all banks, platforms, technology providers, and payment systems to obtain evidence of regulatory approval before providing services to moneylenders.
Conclusion
Generally, the laws and regulations seek to protect both the borrower and the lender to ensure fair practices and promote financial stability in Nigeria. However, money lending laws may differ from one state to another in Nigeria, as each state may have its own specific regulations and licensing requirements for money lending companies. Therefore, money lending companies need to familiarize themselves with the specific laws and regulations applicable to their state of operation.
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