By Muhammad Basir Roslan
KUALA LUMPUR: They may be registered with the Ministry of Local Government Development and regulated by the Moneylenders Act 1951 (Act 400) but the modus operandi of certain licensed moneylending companies is no different from that of loan sharks or ‘Ah Longs’ that charge ridiculously high interest rates and resort to intimidation if their customers fail to make their repayments on time.
Although Act 400 clearly states that licensed moneylenders can impose an annual interest rate of only 12 percent on loans with collateral or 18 percent on loans without collateral, some of them are known to charge much higher interest rates.
In fact, these companies even go to the extent of keeping their customers’ automated teller machine (ATM) cards with them to make it easier for them to collect their monthly dues.
Many people are falling prey to the high-handed tactics of such moneylenders. According to the Kuala Lumpur Consumer Safety Association, it receives over 200 complaints a month, including from civil servants, pertaining to unscrupulous moneylenders.
But the daily figure could be much more than that because, usually, only 30 percent of the victims come forward to lodge a report with the association, its chairman Samsudin Mohamad Fauzi told Bernama.
He said many of them, especially civil servants, dare not seek help as the moneylenders have threatened them they would lose their jobs if they make a report.
“We do 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 of them became victims because of money problems… the situation is worrying because most of them are in the productive age group of 30 to 40. Some are even retired,” he said.
Expected to rise
Samsudin said since 2012, the association has received more than 5,000 complaints from victims of licensed moneylenders and this year alone up to May, it received 800 to 1,000 complaints, adding that 95 percent of the cases have already been settled.
He said Sabah and Sarawak accounted for most of the cases, adding that they had to be settled fast as some of the complainants had mortgaged their land or house to the moneylenders.
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 from moneylenders.
He also said contrary to what most people assume, not all the victims are from the low-income group or B40. He said many of them are from the M40 and even T20 groups whose loan amounts are based on the needs of their income class.
Asked if licensed moneylenders can retain the identity card or ATM card of a borrower, Samsudin replied in the negative, saying it contravenes the Moneylenders Act 1951.
He said moneylending 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 one’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. This section provides for a penalty of two years imprisonment or a fine, or both.
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.
As a matter of fact, moneylenders are obliged 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 Ministry of Local Government Development, that is, either Schedule J (for loans without collateral) or Schedule K (loans with collateral).
However, many 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.
Not enough enforcement personnel
Samsudin feels the Ministry of Local Government Department’s enforcement constraints are the reason why certain licensed moneylenders are openly cheating their customers. The ministry only has 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 Ministry of Domestic Trade and Cost of Living which has a sufficient number of enforcement personnel.
“By right, Act 400 should not come under the Ministry of Local Government Development because it has no relevance to the ministry. It is more relevant for the Ministry of 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 Ministry of Domestic Trade and Cost of Living has an office in every district where people can lodge their complaints. The Ministry of Local Government Development, on the other hand, has only three places where complaints can be made — one in Putrajaya and the other two in Kota Kinabalu and Kuching.
Meanwhile, two victims of unscrupulous licensed moneylenders spoke to Bernama about their harrowing experience after they took the loans.
A single mother from Batu Pahat, Johor, who only wanted to be identified 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 at the end of which she would have paid back a whopping RM11,000 – more than three times the original sum she had borrowed.
“Of course, I can’t afford to pay that much,” she said.
She told Bernama some people came to her house recently and threatened to take her son away from her and put her in a 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 told Bernama.
Another victim, who only wanted to be known 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 remaining loan amount, 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.
“I am now saddled with debts and have to use my entire salary to settle the loans,” lamented Lina, who works as a promoter at a supermarket kiosk.
Universiti Sains Islam Malaysia senior lecturer Dr Muhammad Iqmal Hisham Kamaruddin said victims harassed by moneylending syndicates should make a police report as well as report to the National Scam Response Centre by calling 997. He advised them to gather all proof of transactions and communication with the moneylending company concerned and seek legal advice. – BERNAMA
