When licensed moneylenders operate like ah long

July 26, 2023 Nasional 7 Views

KUALA LUMPUR: They may be registered with the Local Government Development Ministry and regulated by the Moneylenders Act 1951 (Act 400) but certain licensed moneylending companies appear to operate like loansharks or “ah long” by charging high interest rates.

They even resort to intimidation if customers fail to make their repayments on time, according to reports received by the Kuala Lumpur Consumer Safety Association.

Although Act 400 clearly states that licensed moneylenders can impose an annual interest rate of only 12% on loans with collateral or 18% without collateral, some are known to charge much more.

In fact, these companies even go to the extent of keeping their borrowers’ ATM cards to make it easier for them to collect the monthly dues.

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Many people are falling prey to the high-handed tactics of such moneylenders, says association chairman Samsudin Mohamad Fauzi.

The association receives over 200 complaints a month, including from civil servants, pertaining to unscrupulous moneylenders.

But the actual figure could be much higher as it is believed only about 30% of victims come forward, said Samsudin.

He said many of them, especially civil servants, dare not seek help as the moneylenders have threatened to get them sacked from their jobs.

“We get many complaints from victims but for us to help them, they have to come to our head office (in Kuala Lumpur).

“However, many of them can’t come because of financial constraints or because they live in other states such as Sabah or Sarawak.

“Many became victims because of money problems… the situation is worrying because most are in a productive age group, 30 to 40 years of age. Some are also retired,” he said in a recent interview.

Expected increase

Samsudin said since 2012, the association has received more than 5,000 complaints from victims of licensed moneylenders.

This year alone, he added, it received more than 800 complaints up to May, but 95% of the cases had already been settled.

He said most of the victims came from Sabah and Sarawak, and some of the complainants had mortgaged their land or homes to the moneylenders.

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He said the association expects the number of complaints to increase this year in view of the current economic situation which may compel more people to seek loans.

He also said contrary to what most people presume, not all the victims are from the low-income group or B40. He said many are from the M40 and even T20 and the loan amounts correspond to the needs of those groups.

Asked if licensed moneylenders can retain the identity card or ATM card of a borrower, Samsudin said this contravened Act 400.

He said companies that resort to threatening their customers, including by coming to their houses or places of work, are actually violating Section 29(B) of the Act which clearly states that moneylenders or their representatives are not allowed to come to a borrower’s home or workplace.

He said if this happens, a police report can be lodged against the company concerned, which can be charged in court under Section 506 of the Penal Code for criminal intimidation. This section provides for a penalty of two years imprisonment or a fine, or both, upon conviction.

Modus operandi

Samsudin said errant licensed moneylenders dupe their customers into taking loans at far higher interest rates by forcing them to sign a blank form as a condition for approving their loan. The borrowers are not given a copy of the loan agreement.

In fact, moneylenders are obliged by law to provide complete details of the loans for their customers to check before any loan agreement is signed.

For each of these agreements, the companies must use the form set by the Local Government Development Ministry, namely either Schedule J (for loans without collateral) or Schedule K (with collateral).

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However, Samsudin said, some moneylenders trick their customers, especially those applying for loans with collateral, into signing a property transfer document such as Form 14A, which is a Land Office document, and power of attorney document, instead of Schedule K.

These moneylenders can use the property transfer documents to seize the properties belonging to their customers, which is an offence under the law and classified as a commercial crime.

“Based on the Moneylenders Act 1951, (licensed) moneylending companies can only confiscate a borrower’s property through the court process.

“If a borrower fails to settle his/her loan, the appropriate course of action would be to auction the mortgaged property through a public auction.

“Proceeds from the auction will be given to the moneylender concerned while the balance is handed over to the borrower,” Samsudin explained.

Lack of enforcement

Samsudin said the ministry’s enforcement constraints are the reason certain licensed moneylenders could openly cheat their customers as there are only about 40 enforcement officers to monitor over 4,000 licensed moneylenders nationwide.

In view of this, he urged the government to place the enforcement of Act 400 under the purview of the Domestic Trade and Cost of Living Ministry which has a sufficient number of enforcement personnel.

“By right, Act 400 should not come under Local Government Development because it has no relevance to the ministry.

“It is more relevant for Domestic Trade and Cost of Living to enforce this Act. The Hire Purchase Act 1967 and Direct Sales and Anti-Pyramid Scheme Act 1993 also come under this ministry, which has over 2,000 enforcement personnel,” he added.

He said the Domestic Trade and Cost of Living Ministry has an office in every district where people can lodge their complaints.

On the other hand, the Local Government Development Ministry only three places where complaints can be made: in Putrajaya, Kota Kinabalu and Kuching.

Meanwhile, two victims of unscrupulous licensed moneylenders spoke about their harrowing experience after taking out loans.

A single mother from Batu Pahat, Johor, who wanted to be identified only as Ros, said she applied for a loan of RM3,000 from a licensed moneylender but after receiving the money, she was told her monthly repayment would be RM460 over a period of two years.

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This meant she would have paid back a whopping RM11,000, more than three times the sum she borrowed.

“Of course I can’t afford to pay that much,” she said.

She said some people came to her house recently and threatened to take her son away and put her in the lock-up if she defaulted on the loan.

As a “fine” for not settling the loan promptly, they forced her to sign another agreement for a RM25,000 loan to be repaid over 10 years at a monthly payment of RM210.

“I certainly can’t afford this and I’m now living in fear,” she said.

Another victim, who wanted to be known only as Lina from Kuala Lumpur, said she borrowed RM10,000 to repay her car loan and children’s school fees.

“Their interest rate was illogical… I was told to pay RM1,300 a month for 18 months, which came to a total of RM23,400. They even took my ATM card saying it will make it easier for them to get their payment.

“When I could no longer afford to pay the balance, I had to take another loan of RM4,000 from another licensed moneylender for which I was required to pay RM650 a month for a whole year with the total payments amounting to RM7,800.