It’s not often that fintech startups make it into viral memes and TikTok videos, but Palmpay, a Chinese-backed digital wallet offering, is the subject of many social media jibes. Most of the joke formats have the same theme: the lengths to which Palmpay agents will go to collect loans from defaulting borrowers. In some videos, the agents are seen stalking, dragging, or even being verbally and physically abusive to these defaulters. The joke format is so popular that social media users create fictional scenarios around those debt collection methods. The social media lore is hard to ignore and two weeks ago, PalmPay released a statement denying the idea that their collection agents harass people.
PalmPay’s popularity has grown since its launch in 2019 and the fintech is popular for its quick payment processing. According to Semafor, Palmpay was one of the biggest beneficiaries of Nigeria’s controversial currency redesign policy. But more than that, Palmpay’s digital lending business is wildly popular, with interest rates between 15-30% for payday-type loans. Like most digital lenders, Palmpay’s loans are instant and only needs users to download the app. Yet, as many digital lenders learn, lending is the easy part, ensuring that people repay is where the job gets difficult.
Ethical debt collection remains a concern
Because many digital loans in Nigeria are sub-prime, the lenders often factor the risk into interest pricing. They also often use many unethical practices to try to recover the loans once borrowers default. Most of the tactics revolve around public shaming, calling and texting the contacts of the borrower to pressure them into paying. While writing this article, a PalmPay agent called me to say that someone on my contact list had defaulted on a loan of ₦10,700. They also sent me a picture of said contact to on Whatsapp with the person’s name, phone number, BVN and date of birth. The picture also had the text “wanted criminal.”
On PalmPay’s Facebook and Instagram accounts, hundreds of comments complain about harassment from agents or customer care representatives. This has become so commonplace that the company is now renowned for its savage debt recovery methods on social media than it is for actual loans. Many of the debt recovery methods raise serious concerns about privacy and ethics.
NITDA is slow to act
Reporting on privacy concerns relating to digital lenders is not new, yet the National Information Technology Development Agency (NITDA) has been slow to act. In 2021, it fined Sokoloan, a digital lender, N10 million for unauthorised disclosure, failure to protect customers’ personal data and defamation of character, and to carry out due diligence as prescribed by the Nigeria Data Protection Regulation (NDP).” The expectation at the time was that NITDA would continue to take a strong stance on privacy abuse by digital lenders, but progress has been slow. A new policy, which will block digital lenders from accessing the contacts or photos of borrowers will only take effect from May 31, 2023.
In July 2022, Nafisa borrowed ₦5,000 from her PalmPay app to pay for her bus fare from Bauchi state to Jos where she was posted for her National Youth Service assignment. A day before she was supposed to leave, her father’s third wife gave birth to a baby prematurely, forcing him to divert whatever funds he had to the hospital bills. He sent her to their neighbour to ask for a loan, promising to pay it back at the end of the month, but Nafisa found that embarrassing, and opted to take a loan from an online app. According to her, this was a big mistake.
The true cost of loans
“I used to see a lot of adverts on my phone for these apps that lend you money for one month or two months that you can pay back with interest, and it had stayed in my mind. I downloaded a couple of them just to see how it was and all they asked for was BVN, address, bank details, pictures, contacts—all these things that seemed basic to me. I didn’t even think of anything wrong that could happen at that time,” she said.
“The interest rate for the loan was about ₦1200 naira which you were supposed to pay back in two weeks. My father had promised to send me money at the end of the month so I was confident that I would repay it. Thinking back now, I should have just gone to my neighbour as my father said to, but I was shy. Going to beg for money is not the easiest thing to do, so I just decided to do it my way. After all, no one would know that my family needed money with PalmPay.” After filling in all the details and granting all the app permissions, Nafisa’s loan application was approved and ₦5000 was paid into her Zenith account. “It was so quick, much more convenient than going to narrate stories to anybody,” she shared.
A complicated repayment process
Twelve days later, her father sent her the money as promised and the first thing Nafisa thought to do was repay her PalmPay loan. That was where her problems started. “My card details were added to my PalmPay profile, and all I needed to do was authorize the repayment and they’d charge from my card. That didn’t work after repeated trials, so I decided to make a transfer to the account number there. I was debited, but it still didn’t reflect on the app.”
She started receiving texts from PalmPay asking her to repay her loan and threatening to call her contacts. Nafisa was frustrated. She kept explaining to the customer care reps who called her that she had repaid the loan, and they always promised to look into it, but she would receive a call from a different customer care rep the next day, telling her to repay her loan. She recalls that one of the reps called her shameless.
“That was one of the worst periods of my life. I had seen what online loan companies do to debtors and I didn’t want it for myself. One day, a strange number sent me a message on Whatsapp with a picture of a family friend, saying that she was a thief and telling me to inform her to repay her loan or else they publish her picture in a newspaper. I didn’t know what I’d do if that was me.”
Eventually, she reached a customer service representative who sent her different account details to make a transfer to and her loan was cleared. For a loan of ₦5,000, the true cost was ₦12,400 and a ton of anxiety. Nafisa’s heart still skips whenever she receives a call from an unsaved number.
Alex’s story doesn’t end nearly as well as Nafisa’s. He borrowed ₦10,000 from PalmPay to be repaid on payday. Unfortunately for Alex, a government employee, his salary was delayed and he was unable to repay the loan. After daily calls from PalmPay’s loan collection team, the company contacted his family.
“I was at work one day when my mother called. Someone had called her, informing her that I owed them money and advising that I repayed before 5 pm on that day else they would publish my picture on TV. She was scared and thought I was involved in some dark business,” he shared. He says that customer service reps called his mother every day for close to a week until they stopped. The following week, they began contacting random people on his contact list.
“My brother-in-law called me to tell me that he received a call from someone saying I was owing them money. My old friend from secondary school also called to ask if everything was okay. They called all my sisters as well and told them that they were going to post their own pictures alongside mine. The customer service reps are rude and uncouth. They call you and go straight to insults, calling me names, and even sending me the pictures of myself that they were going to post which included my full name, date of birth, BVN, and phone number, with ‘WANTED CRIMINAL’ written on it.” He eventually repaid the loan and the harassment ended, but he deleted the app after that for good.
There are hundreds of users like Nafisa and Alex, and their experiences highlight the need for new conversations on data privacy and debt collection methods. Palmpay did not respond to a request for comments.