THE review committee's recommendations on the moneylending industry are realistic, balanced and appropriate ("Changes proposed for licensed moneylending"; Tuesday).
However, we feel that two other areas need to be urgently looked into: the guidelines on acceptable debt collection practices, and the enforcement of rules and regulations.
The reality on the ground is that many moneylending companies are known as "licensed loan sharks" as their harassment tactics are as bad as the unlicensed ones.
Their debt collectors bang on the doors of the debtors and shout aggressively, and even call up debtors' workplaces. They go as far as to harass family members in order to get them to pay up on the debtor's behalf.
We recommend that the following guidelines be set up:
Debt collectors should be allowed to visit only the residence of the debtor as stated in the contract. They should not be allowed to ask for the addresses of the debtor's family members.
Similarly, they should be allowed to call the debtor only on the phone number stated in the contract.
Debt collectors should be allowed to visit the debtor's residence only at stipulated hours, for example between 12pm and 8pm. Debt collectors should not be allowed to harass the debtor at his workplace or call him on his office number.
Currently, low-income earners can be charged an interest rate of only 20 per cent a year.
However, we have had many cases of people being charged 20 per cent to 40 per cent a month. The moneylending company does this by writing up complex contracts, seemingly based on very low daily interest rates.
In reality, the interest charged is way above the limit allowed.
These low-income earners, who are largely lowly educated and unable to comprehend the contracts' complexities, end up in the vicious circle of the debt trap.
Enforcement needs to be proactive rather than passive.
Enforcement officers from the Insolvency and Public Trustee's Office should not only act on complaints but also make regular checks on contracts drawn to ensure compliance.
Repeat offenders should also have their licences revoked and be banned from the industry.
Blessed Grace Social Services Gamblers Recovery Centre
This article was first published on Nov 8, 2014.
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