Loan sharks, beware - Tough law to rein in predatory lenders
Published:Saturday | March 9, 2019 | 12:00 AMEdmond Campbell/Senior News Coordinator
In a move to protect consumers, bring order to the operations of microcredit institutions, and to ensure that these entities are not used for money laundering, the Government has proposed a stringent law that was tabled in Parliament on Thursday.
Finance and the Public Service Minister Dr Nigel Clarke tabled the Microcredit Act to license and regulate microcredit institutions that provide financing to individuals and micro, small, and medium-sized enterprises.
The proposed legislation is also aimed at discouraging microcredit institutions from lending money at excessive interest rates and from engaging in predatory lending practices.
If lawmakers give the green light to this piece of legislation, microcredit institutions that fail to comply with stipulations could face stiff fines.
The bill states that since 2003, there has been a proliferation of privately owned moneylending institutions that have sought to satisfy the demand for funding of MSMEs.
“The significant increase in these institutions has presented new challenges to conventional regulation, especially owing to their lending modalities which do not fit easily into existing legal and company structures,” the bill read.
Also, there has been a steady increase in requests from these institutions for exemption from the provisions of the Moneylending Act, which provides some protection and recourse for borrowers, the Memorandum of Objects and Reasons states.
The bill seeks to regulate persons who provide microcredit services, ensuring that such persons are licensed by the Regulatory Authority and required to keep proper accounting and other records and make reports to the Authority on a timely basis.
The proposed law also prohibits false and misleading advertising by microcredit institutions and makes it an offence for these entities to use threats and violence in the process of collecting a debt.
The bill seeks to regulate the provision of microcredit services offered by microcredit institutions in order to ensure that:
- Microcredit services may be utilised by MSMEs and individuals to facilitate their financial or economic advancement.
- The interest of borrowers may be protected by discouraging excessive interest rates and predatory lending practices by microcredit institutions.
- The sustainable growth of MSMEs may be facilitated.
- A transparent, fair, and competitive landscape is created for microcredit institutions.