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Clampdown on rogue money lenders

By Lekhetho Ntsukunyane and Mamello Mokaeane

The Central Bank of Lesotho (CBL) has embarked on nationwide investigations aimed at rooting out illegal financial institutions and money lenders, the MNN Centre for Investigative Journalism (MNNCIJ) has learned.

This follows disturbing reports of how clients were being treated by rogue money lenders who, among others, solicit and seize important and personal documents like passports, national identity cards and debit (ATM) cards from the borrowers, as collateral for loans.

An independent observation by MNNCIJ can reveal that the lenders even go to an extent of requesting from borrowers their private identification numbers (PINs), which serve as personal secret codes to access their bank accounts using the debit cards.

The illegal money lenders then use the borrowers’ PINs to actually withdraw loan installments from clients’ bank accounts themselves, come payday.  The borrowers can only ask for their debit cards from the money lenders after the latter have made monthly instalment withdrawals.

The borrowers, after making transactions, have to return their debit cards to the money lenders the same day they borrowed them. This happens until payment of the loan, plus exorbitant interest charges, has been made in full.

According to the CBL, money lenders should charge an interest rate of 25 percent per year on loans. But the Centre observed the lenders charged between 25 and 30 percent per month from loans, bloating interests against the country’s financial laws.

The Center also observed victims that fall prey to the money lenders were mostly teachers, law enforcement and security agencies’ officers and pensioners.

The malpractice could however end soon with the help of the recently launched nationwide investigations by the CBL, as the regulator.

The bank’s delegation, comprising Director of Corporate Affairs Napo Rantsane, Head of Non-Banks Supervision Division Bafokeng Noosi, Chief of Corporate Communications Ephraim Moremoholo and Technical Communications Specialist Moroke Moroke, told MNNCIJ in an exclusive interview last week the investigations were aimed at taking stock of all illegal money lenders “and take action to shut them down.”

The team was organised by the bank to respond to the Centre’s findings.

Mr Rantsane said it had come to the CBL’s attention there were mushrooming unlicensed money lenders whose practices violated rights of their clients.

“These practices include, but not limited to; forcing clients to surrender important documents like passports, IDs and debit cards with PIN codes; charging exorbitant interest rates, contributing immensely to the high levels of over-indebtedness; and engaging in collection methods that are abusive and intimidating to their clients,” Rantsane said.

It was against the backdrop, he added, that the bank commissioned nationwide investigations to clamp down illegal money lenders.

“The CBL, as the commissioner of financial institutions in the country, is investigating unlawful money lending business and thereafter legal action will be taken against anyone found to be engaging in unlawful money lending business.

“The bank would like to assure you that it is currently taking stock of all money lenders who are operating illegally in the country. Once the investigations have been completed, appropriate action will be taken to shut down all unlicensed and noncompliant financial institutions and money lenders in Lesotho, and this will be done in collaboration with relevant institutions of government,” Rantsane said. The investigations were currently underway in all the country’s ten districts, he added.

Asked what role the bank, as regulator, played to monitor operations of financial institutions in the country, Mr Noosi chipped in and said: “The CBL is required by law to publish a list of licensed financial institutions and money lenders and does so by regularly publishing them on the website and various newspapers within the country.

“The bank also continually advises members of the public and the media on the updated list of licensed financial institutions as and when the need arises. It is wrong for money lenders to confiscate documents like passports, IDs and debit cards with pins. It is equally wrong for the people to surrender these documents to money lenders when they apply for loans.”

Passports and IDs, Noosi added, remained properties of the government “and shall be produced when so required by an authorised official or relevant authority. This means the sole purpose of a passport is to facilitate travelling while IDs are meant to verify the real identity and not to be used as collateral for loans.”

He added ATM or debit cards were meant to facilitate safe and secure transacting “and may be used by the authorised person only. Personal identification number (PIN) is a secret code and should only be known by the owner of the bank account. Under no circumstances should it be given to a money lender.”

Mr Moroke emphasised CBL does not support “and will never allow these illegal practices that negatively affect the integrity of the financial sector in Lesotho. The bank is also aware and concerned that some money lenders, particularly those who are not licensed by the Central Bank of Lesotho, are engaged in bad business practices or market conduct.”

For his part, Mr Moremoholo urged members of the public to desist from dealing with money lending businesses operating illegally in the country and warned perpetrators.

“The bank will also continue to educate members of the public on their rights and responsibilities as consumers of financial products and services,” he said.

Meanwhile, in one of the illegal money lending cases, the Mafeteng police are investigating an incidence of 128 national ID cards and 15 debit cards that were ironically found dumped in a toilet within premises of the department of public works and transport within the town.

The documents, according to the police, were discovered shortly after one of the money lending businesses, MM Financial Loans operating in the district, reported they were missing from their office in what seemed a burglary last month.

In an interview with the Center, the district police commander, Senior Superintendent Tsea Makara, said they were shocked to learn that MM Financial Loans kept the documents from clients as collateral for loans.

“What is even more shocking to us is that we learned clients were also obliged to provide their ATM cards’ PIN numbers upon applying for the loans,” S/Supt Makara said.

He added, as the police, they were ready to partner with the regulator “to root out this kind of practices because they are against the financial laws of the country.”

MM Financial Loans is one of the several common money lenders which do not appear on the list of financial service providers licensed by the CBL. The Centre was provided with a list of licensed money lenders as at 31 March 2018, by the bank.

Repeated efforts to engage the MM Financial Loans owner, Mr Nthole Mojapela, proved unsuccessful as he kept postponing conversation with these reporters.

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