THE Consumer Affairs Commission (CAC) is working on implementing a code of conduct for Jamaica’s microcredit sector to align with the recently enacted Microcredit Act.

This initiative aims to curtail predatory lending practices and promote ethical behaviour among microcredit institutions.

“Before, they were not regulated any at all. And we had some unfavourable behaviour from some of these microcredit institutions,” Dolsie Allen, CEO of the CAC, said in a
Jamaica Observer Business Forum.

The Government’s financial inclusion initiatives have placed a spotlight on microcredit institutions as alternative financial providers to traditional banks. However, as the sector expanded, issues of unethical practices became evident, with some institutions found offering loans with deceptive and onerous terms.

“There was a recognition that there were some unsavoury characters in the business,” said Cheryl Martin Tracey, director of field operations at the CAC.

The Microcredit Act, which formally came into effect in 2021, is designed to bring accountability and structure to the sector. As the CAC works to finalise a comprehensive code of conduct for microcredit institutions, much of it will draw directly from the provisions within the Act itself. This code will set clear standards for lending practices, ensuring transparency and fairness. One of the most pressing concerns is the issue of loan terms, with many consumers unknowingly agreeing to extremely high interest rates and unfair clauses.

“Very onerous interest rates. I mean, you take a loan and then they want your firstborn child, that sort of thing,” she said with hyperbolic humour.

“Some very onerous contract terms that oftentimes people don’t read or if they don’t understand.”

Another major focus of the CAC’s regulatory efforts is the conduct of bailiffs. Reports of aggressive tactics employed by debt collectors have prompted the CAC to implement stricter rules around their operations. She cited instances where bailiffs have resorted to extreme methods, such as showing up at all hours of the day or night to harass borrowers.

“Bailiffs have been practising threatening people to repay. Now, that is precisely the conduct that is frowned upon,”said Martin Tracey to the Business Observer.

The CAC is working closely with the Bank of Jamaica to develop a code of conduct that will impose ethical standards on microcredit institutions and their interactions with the public. However, challenges remain, as many microcredit institutions have yet to comply fully with the new regulations, and many are still operating outside physical offices. While the code of conduct is still being finalised, the CAC’s immediate priority is to address consumer complaints and mediate disputes. The CAC says it is committed to bringing order to the microcredit market by ensuring that institutions adhere to the standards set out in the Act. While there is more work to be done in establishing a code of conduct under the Microcredit Act, progress is ongoing. Martin Tracey noted that the Act, enacted in 2021 during the height of the COVID-19 pandemic, is still in its early stages of implementation. Initial efforts have focused on the registration of microcredit institutions, with companies given time to comply with the regulations.

“The Act also outlines what should be included in the code of conduct, so it’s not separate from the Act itself,” said CAC CEO Allen.

“The code we’re developing is essentially drawn from the Act. If an issue arises, we can report it to the Bank of Jamaica as a breach of the Microcredit Act.”