Moneylending Act facilitating chokehold on borrowers

Letters to the Editor

Moneylending Act facilitating chokehold on borrowers

Wednesday, August 21, 2019

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Dear Editor,

There remains among Jamaica's statutes a piece of legislation that is being used in a harsh and unconscionable manner, mainly to the detriment of the poor and less financially able classes in the land. That legislation is the fiendish MoneyLending Act passed initially in that most tumultuous year, 1938.

This Act is used by moneylenders that are not regulated by the Bank of Jamaica or the Financial Services Commission. In fact, the moneylending sector is not regulated in Jamaica. It is amazing that in the often justifiable howls against the regulated financial institutions for charging high rates of interest and for levying high and cunning fees that this class of payday moneylenders has, to a large extent, escaped scrutiny and justifiable criticism.

There are many a barber, tradesman, teacher, and policeman who have had to file for bankruptcy as their only perceived way out from the oppressive pressures brought to bear under the contractual terms required by money lenders who operate under this Act.

The critical subsection (1) of Section 14 of the Moneylending Act is what gives rise to moneylenders being able to charge rates as high as 52 per cent per annum — it can get as high as 84 per cent add-on with fees piled into the amortisation calculations.

This section allows the relevant minister to approve an exemption order that allows the lender to charge a high rate of interest that compounds daily. Of course, none of this would be accepted by a sophisticated borrower. The sad reality is that it is desperation and lack of credible and informed financial counselling, and perhaps slick advertising, that drive borrowers to 'freely' enter into these chokehold contracts.

I would be disappointed if this Act and its many amendments were designed to give legitimacy to loan sharks.

So, while in the risk-return paradigm higher premiums are appropriate for higher risks, these hellish rates and the unconscionable contractual terms are certainly not designed to assist the borrower to bridge short-term gaps for medical expenses, or back-to-school costs, or to start small businesses. Otherwise, rates and terms would be more akin to the Grameen microfinance banking model.

I, therefore, call on the minister of finance and the public service; the minister of industry, commerce, agriculture and fisheries; along with the loyal Opposition and the civil society fraternity to place a priority on reviewing this legislation.

Notwithstanding that the legislative agenda is already jam-packed, this review will address the cry for social and economic justice. The current Act is a mere 12 pages long and the relevant expertise can be harnessed to focus on this matter.

An improvement of this legislation will not only serve the cause of justice, but will allow many who labour in the shadows to take closer steps to prosperity and help chart a path for the reputation of the moneylenders to be redeemed and elevated.

Christopher Pryce

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