#image_title
Micheal Orji, a construction engineer in Lagos, is used to receiving sizable payments from clients. He gets alerts on his phone after the money has landed. But this time was different. When a credit alert of ₦290,000 ($200) hit his phone, none of his clients, business partners or friends claimed responsibility for the deposit.
The truth only surfaced when calls from a lender, Newcredit, began flooding his phone, followed quickly by threats of public humiliation if he did not repay the “loan.” That was the first moment Orji realized the money was not payment from a client, but a loan he had never applied for.
A few years ago, he had used the app. He was in desperate need of cash — he needed around ₦80,000 ($55)—but he had paid it off and deleted the app.
Still, the lender had access to his personal data. Within days, the lender called his contacts—business partners, colleagues, and friends—shaming him as a fraudulent borrower.
The reputational damage was immediate. Orji found himself scrambling to protect relationships, trying to explain that he had never requested the loan in the first place.
The harassment escalated. The lenders told him to “refund the money” by submitting debit card details—an instruction Nigerian banks repeatedly warn customers never to follow. It was, he said, the final confirmation that something was wrong.
This is not an isolated experience. Esther Adewunmi’s comment on Palmcredit’s Google Play store is another example. Midway through requesting a loan after downloading Palmcredit, she decided the high interest rate and short repayment window were not terms she could agree to. She declined the loan, providing her reason as “interest rate too high,” then closed the app.
The next day, however, she received a notification of a deposit into her account from Palmcredit.
Palmcredit and Newcredit are examples of online-first lenders issuing loans to subscribers when they have not expressly asked for it or have abandoned a loan application halfway through. Borrowers get looped into a debt cycle continually taking on more debt than they are able to repay, often borrowing more to pay off existing debt.
About a decade ago, the idea of applying for and receiving a loan online, without collateral, seemed far-fetched in Nigeria. When in need of cash, people turned to family and friends and to informal savings groups.
Commercial and microfinance banks, regulated by the Central Bank of Nigeria (CBN), required strict vetting and favored corporate borrowers who were less likely to default.
But boosted by an internet boom and affordable smartphones, digital lenders became popular. They offered small, fast, digitally-accessible collateral-free loans. To access these loans, borrowers needed to prove their creditworthiness through a stable employment and income.
Today, most digital lenders use smartphone data and behaviour-based algorithms powered by machine learning to build credit scores that determine who can receive a loan.
By 2016, Paylater (now Carbon) became the first to offer a lending app to Nigerians. The next year, Branch and Fairmoney entered the Nigerian market with their consumer-focused lending apps.
In September 2025, 400 digital lenders were operating in the Nigerian market with full operational approval from the Federal Competition and Consumer Protection Commission (FCCPC). There are now almost three times as many lenders as there were in April 2023.
These digital lenders primarily served individuals and small- and medium-scale businesses historically shut out from traditional bank credit, offering them quick, small loans at high interest rates.
Some lenders also require a customer’s Bank Verification Number (BVN) or request access to bank statements through APIs. With this data, digital lenders determine credit limits, set the interest rate, and define repayment schedules.
Palmcredit’s terms and conditions grant it the right to harvest highly intrusive data like contact lists. It warns that the company can notify contacts in the case of defaults. Its terms also disclaim liability for errors, inaccuracies, downtime, or even fraudulent use of customers’ accounts. In practice, this means that if a loan is issued without a customer’s consent, the borrower has little to no legal recourse.
To compensate for the lack of collateral, digital lenders attach high interest rates, effectively pricing in expected defaults. Borrowers now shoulder both the invasive surveillance and the financial burden.
“Palmcredit’s terms and conditions grant it the right to harvest highly intrusive data like contact lists. It warns that the company can notify contacts in the case of defaults. Its terms also disclaim liability for errors, inaccuracies, downtime, or even fraudulent use of customers’ accounts. In practice, this means that if a loan is issued without a customer’s consent, the borrower has little to no legal recourse.”
While loan apps have thrived in Nigeria’s credit-starved market, some deepen their exploitation of already vulnerable borrowers through “dark patterns.”
Coined by user experience (UX) design expert Harry Brignull in 2010, dark patterns are deceptive features designed into digital products to persuade users into certain actions or outcomes when they interact with the product.
Oluwadamilola Ajulo, a user experience (UX) researcher, says these dark patterns are intentional. “It’s (like) design thinking, right? It’s a thought-out process. No one produces something without putting thoughts behind it. It’s all part of the plan. It’s all part of the design,” Ajulo says.
These dark patterns can manifest in several ways. One clear sign with digital lenders is in how information is presented: hidden fees, unclear terms and privacy notices, and little transparency about how interest rates actually compound.
Dark patterns can also manifest in “immortal accounts” where users have no clear and apparent options to delete their data from an app. Orji, for instance, may have deleted the app from his phone, but his account likely remained active with the loan app, explains Ridwan Oloyede, AI Governance and Tech Policy Lead at Tech Hive Advisory, a digital rights and intelligence organisation in Lagos, Nigeria.
They can present as data traps: An individual’s information can be used in harmful ways by issuing loans and seeking repayment after they have unwittingly granted the apps full permission.
Dark patterns in app designs also create an appearance of trustworthiness and a sense of urgency in users, forcing them to take action immediately. Oloyede says some lenders use social proof by displaying unverifiable testimonials or outright falsehoods, sometimes as pop-ups, about the product, to boost perceived credibility and create urgency.
In his research, Oloyede says there are apps that purchase false testimonials from “review as a service” marketplaces; A user accesses these apps with “high ratings” on an app store and feels confident that it is a legitimate lender.
App stores consider this fraudulent practice with severe penalties for apps found culpable. In some cases, these apps may be removed from the app store entirely.
Others employ visual manipulation like bright colors in pop-up call-to-action buttons that force people to take action. Icons are positioned to the right side of a screen where they are more likely to catch the eye, or a tactic referred to as “confirm shaming,”guilt-inducing language that pressures users who attempt to exit the application mid-process to keep going.
“Don’t give up! Fill in a little more information, and you’ll get the money,” Oloyede says, citing one example from the digital lender Spark Credit.
Ajulo, whose research spans several tech sectors, says dark patterns aren’t unique to digital lending apps and are so subtle that users subconsciously bypass them. “For lending platforms, it is so obvious, but because their target customers are already desperate for cash, they tend to overlook it and say ‘you know what? I’m just going to do it.’”
“It’s not a tech problem. It’s a psychological problem,” Ajulo says.
Simply put, dark patterns exploit people who urgently need money, using misleading design and language to make borrowers believe they are in control, when in reality, they are being manipulated.
“There’s a way the visual elements, the framing elements, push people into these things,” Oloyede says. “Would they have made that decision if that information was presented there, if you don’t have flashy buttons, if you don’t have that kind of framing, if you don’t have that kind of deception, would they have done the same thing?”
Financial apps that do not employ dark patterns are clear and forthcoming with information that users must know to properly utilise products and services. Onboarding isn’t hasty, features and benefits are clearly explained, and costs and timelines are clearly communicated.
By contrast, fintech apps, particularly digital lenders with predatory undercurrents, “tell you half of the story,” Ajulo adds.
“They only tell you, ‘You can get the loan in 60 seconds or in one minute.’ They never tell you the consequences or the cost for all of those. They don’t help you make informed decisions,” he said.
The only difference between a digital lending app that employs these patterns and, say, an e-commerce app that does the same, he argues, is the cost of taking action. On an e-commerce app, a customer makes a non-recurrent, frivolous purchase, whereas in a lending app, an outstanding debt accrues interest that worsens their already dire financial situation.
“Dark patterns exploit people who urgently need money, using misleading design and language to make borrowers believe they are in control, when in reality, they are being manipulated.”
When users skip reading the terms and conditions, a simple pop-up could lead to a loan disbursement, a lapse in judgement some lenders are quick to exploit.
Pelumi Abimbola, a product designer formerly employed at Lendsqr, a loan-as-a-service company, says what users might be referring to as outright loans, are tailored advertisements which lenders make after they have gathered relevant information from users when they sign up.
Though these offers can be persistent and also appear off-apps, they are essentially targeted ads, not loans.
Even after a user decides to take up a loan offer, Abimbola says that borrowers have to make standard applications, which are vetted based on the information they have provided.
“As designers, we should ensure that these things are upfront and visible,” he said, but there’s only so much that product designers can do when users fail to do their due diligence.
For borrowers who are in desperate need for cash, ignoring details is easy, and the result costly.
Still, crediting funds to a user’s account when they have not expressly given consent “is a big ethical issue,” says Abimbola.
After Orji learned that a loan had been disbursed, he urged the company’s representatives to initiate a reversal with the bank because he did not need the money and no longer had easy access to the account. They did not and continued to contact him, and several people on his contact list, over several months.
“I had to start telling people that this is what I’m experiencing; I didn’t apply for this loan, and they credited me [and are] now forcing me to repay money I didn’t apply for,” Orji says.
Chukwujekwu Ejike, a Lagos-based driver who was credited a loan he did not expressly request and is still repaying, had asked the lender’s representative over a call to reverse the money.
Ejike says he received a half a million naira loan on EasyBuy, a device financing lender from which he’d previously borrowed. He says he may have clicked a button on a pop-up by mistake, but the company refused to send an account into which he could pay it back or initiate a reversal and “just left me with the option of paying the money,” he says.
“That ₦500,000 ($346), in six months, the interest is ₦200,000 ($138),” he says, adding that he’s since split the principal and interest with a colleague who needed financial assistance.
Palmcredit and NewEdge Finance (owners of Newcredit and EasyBuy) did not respond to requests for comments on this story.
In the past five years, rising inflation and cost of living have significantly contributed to the increased popularity of digital lending. By late 2024, Nigeria’s inflation crisis had pushed more households into debt. Food inflation soared to 40%. Nearly three out of every four goods and services registered price increases.
With the steep rise in transport and energy costs, families are left with little room to stretch stagnant incomes. For many, borrowing became the only option to cope with the surge in cost-of-living.
According to Nigeria’s Central Bank, consumer credit debt climbed 11.1% to ₦4.72 trillion ($3.27 billion), driven largely by personal loans, and now account for more than 80% of household borrowing.
Retail loans, by contrast, fell 18.2%, an indication that Nigerians were not borrowing to buy durable goods like refrigerators but rather to cover essentials like food, rent, and transport.
“Inflation has severely squeezed disposable income, creating a critical gap between pay cheques and the rising cost of essentials,” said Ikemesit Effiong, a partner at SBM Intelligence, a Lagos-based think-tank.
“Traditional banking can be slow or inaccessible for many, so these digital loan apps have stepped in to provide immediate, short-term relief. They are essentially a symptom of the wider economic pressure, offering a quick fix for daily survival in a challenging environment.”
For many Nigerians, it is not uncommon to be indebted to several digital lenders at the same time or to enter into a cycle of borrowing more, if they can, to pay off already existing debt on the same apps.
In Nigeria, digital lenders fall under the oversight of both the Central Bank of Nigeria (CBN) and the Federal Competition and Consumer Protection Commission (FCCPC). But regulation isn’t limited to the federal level. According to Oloyede, many state governments also issue “moneylenders’ licenses,” allowing these apps to operate legally within specific states.
The problem is that geography means little in the digital marketplace. Once an app is listed on the Play Store or App Store, anyone anywhere in the country can download and use it—regardless of whether the lender holds a national licence from the CBN or FCCPC. This loophole has effectively allowed some digital lenders to operate far throughout the country.
Oversight can be lax. The FCCPC currently lists 47 digital lenders whose operations have been banned in the country and 103 on its watchlist. Palmcredit, Easybuy and Newcredit are all licensed by CBN.
Both the CBN and the FCCPC did not respond to multiple requests for comment.
Laws and regulations such as the Federal Competition and Consumer Protection Act, the Nigeria Data Protection Act , Credit Reporting Act, and the General Application Implementation Directive (GAID), include provisions against deceptive tactics and govern how personal data is handled.
Central Bank regulations emphasize transparent lending, requiring the clear provision of information regarding terms and charges.
In response to consumer complaints, government agencies have targeted some lending apps.
In August 2021, the National Information Technology Development Agency (NITDA) imposed a ₦10 million ($18,000) fine on digital lender, Soko Lending Company, for invasion of privacy after being found guilty of illegally tampering with users’ private data.
In October of the same year, Google took down a number of predatory loan apps from its Play Store for violating its policies.
Despite these efforts, regulation of digital lenders remains fragmented, leaving borrowers to navigate a confusing maze of agencies.
“For every layer of problem, you find a law that deals with it on a generic level that if regulators are also willing to enforce their mandate, we can actually deal with this problem,” says Oloyede.
A recent, more robust addition to existing regulation on digital lenders has come from the FCCPC as part of its effort to consolidate regulation of the sector. The new DEON (Digital, Electronic, Online or Non-Traditional) Consumer Lending Regulations took effect on July 21, 2025. The regulation imposes strict consent and transparency requirements on any digital lender operating in Nigeria.
In plain terms, nothing about the lending transaction can proceed unless the customer actively agrees to it.
The rules state that lenders must disclose all loan terms in plain language before any contract is finalised. Borrowers must receive a copy of the loan agreement (digitally or on paper) before any money is disbursed. Lenders are required to spell out interest rates, repayment schedules and fees, with no hidden charges.
Borrowers’ consent must be explicit before any credit is issued. The regulations require that credit advances be issued only when a consumer opts in for the loan. In other words, a lender cannot lawfully push money unless the customer has first requested it.
Any automatic or “pre-approved” top-up without consent is banned.
On data privacy, the DEON rules heavily rely on the new Nigeria Data Protection Act standards. A borrower’s personal data is treated as highly sensitive. It can be processed only for legitimate credit-related purposes. Lenders can’t just harvest personal data and abuse it.
The new regulation places the onus on digital lenders for resolving disputes. Digital lenders are now mandated to disclose their issue resolution process, including complaint channels (email and/or phone numbers), and resolution timeframes.
They are mandated to resolve consumer disputes within 24 hours of receiving a complaint. If more time is needed, it has to be resolved in 48 hours..
If a lender fails to follow the regulations, consumers can seek redress from the FCCPC directly by emailing lenderstaskforce@fccpc.gov.ng or by using other complaint resolution options on the Commission’s website.
“If a lender fails to follow the regulations, consumers can seek redress from the FCCPC directly by emailing lenderstaskforce@fccpc.gov.ng or by using other complaint resolution options on the Commission’s website.”
The new rules clamp down on abusive debt-collection tactics.
Bombarding someone with unsolicited loan offers, publicizing their debt on social media, or pestering their friends, family, and even acquaintances is no longer allowed. Exposing a customer’s loan status or personal details without consent violates Nigeria’s data protection laws.
In fact, sending defamatory messages about a borrower to people who weren’t even part of the loan transaction is a breach of privacy rights and repeated, menacing messages or false threats sent via phone or online constitutes a criminal act.
What happens if lenders ignore these rules? The penalties for violations are stiff. A company can be fined up to ₦100 million/$69,600 or 1% of annual turnover, whichever is higher. With individual penalties up to ₦50 million. Company executives can also be held responsible.
Beyond FCCPC sanctions, victims can sue for defamation or for unlawful data handling.
The effectiveness of the new law in protecting consumers and regulating digital lenders will ultimately be determined by its implementation.
For potential borrowers, it’s not impossible to decipher when dark patterns are at play.
“From a design point of view, you also want to check for basic things like: Are these people just nudging me to do things or they’re giving me a bit of opportunity to push back on things,” Oloyede says.
“So if you see something like ‘borrow with confidence’, ‘borrow and repay’ and the only button that is there from an action point of view is ‘borrow money now, that’s a red flag. Because it’s not giving you an option to pull back.”
Another thing to note is social proofing. Use an abundance of caution to assess positive reviews and judge their authenticity. If a loan app operating in Nigeria has users on the Google Play Store lauding a lender with comments in other currencies or languages or has too many positive reviews, that’s something to be wary of.
Other things to watch out for include trick questions and prompts that force you into consent. If you do not fully understand the terms of your credit agreement, that is a warning sign.
Ajulo recommends “reading the fine print” and making sure you’re properly onboarded, a sign of ethical design thinking.
“If you leave the onboarding process without getting appropriate information and there’s no support to reach out to, just know you’re getting trapped,” Ajulo says.
This is a collaboration between the Center for Collaborative Investigative Journalism and TechCabal.
I spent the last week asking HubSpot marketers to get really honest about what actually…
Startups On Our Radar spotlights African startups solving African challenges with innovation. In our previous…
Valuations are important for tech startups; they determine whether investors can earn a return on…
Lingering Questions is one of my favorite parts of the Masters in Marketing newsletter, because…
Over the last five years, the business world has undergone a more dramatic transformation than…
Lights dim. Sounds hush. The aerialist spins into the air. Sequins sparkle in the warm…