How loan sharks get smarter | New times

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Illegal money lenders, commonly known as loan sharks or Lambert Bank, are stepping up their game in an attempt to get around the law.

While the central bank has been tough on illegal money lenders, it still remains a challenge to eliminate them.

The growing demand for quick cash from people who are not eligible for traditional bank credit or who hate the tedious procedures required for loan seekers has created a market for loan sharks.

“Lending sharks” describe themselves as businessmen who offer small loans to their clients although they are not registered with the central bank as authorized lenders.

Unlike banks and financial institutions that extend loans using wages or property as collateral, loan sharks prefer property or signed checks as collateral.

The issue of checks has become unpopular among loan sharks, because once they bounce back, the loan shark and the issuer get into trouble with the law.

To avoid this, loan sharks prefer the property, which they actually take possession of until the loan is repaid. If there is a delay, the property is quickly sold, often for an amount much more than the loan, but the shark keeps everything.

As the demand for their services increases, so does the line of credit.

A section of loan sharks now uses cars as collateral for the loan granted.

However, since you cannot sell someone else’s car unless it is in your name, loan sharks insist that before the credit is issued, ownership is transferred.

The transfer process often involves the lender and debtor going to the Rwandan Fiscal Authority (RRA) to change the car ownership details on the debtor’s motor vehicle log, commonly referred to as a “yellow card”. .

Changing a car’s yellow card details is a straightforward process typically done after purchasing a motor vehicle to show the new owner of the vehicle.

A yellow card contains details about the car such as make, model, year of manufacture and owner.

The two then agree on the terms of the credit, including the interest on the loan. When repaying the “loan”, the car ownership transfer procedure is repeated at RRA to return ownership to the debtor.

With this, lenders end up “owning” multiple cars for short periods of time, leading RRA to suspect unusual activity.

Therefore, RRA conducted an investigation which found that illegal money lenders were using the auto service department to conduct their business.

RRA commissioner general Richard Tusabe said they have since started working on a solution to ensure their office is not used for such practices.

“We have seen this risk and we are working on it, we will give you a solid solution in the coming days. “Bank Lambert” is illegal, when you see how busy the motor vehicle department is it tells a story that something is wrong, ”Tusabe told The New Times.

He said the solution will be rolled out in the next two or three months.

“We have chosen it and we are going to apprehend the criminals who are exploiting it. The government does not allow this practice, I promise you will see changes in the next two or three months, ”Tusabe said.

Why do people use loan sharks?

City loan sharks have become popular in large part because of their ease in providing quick short-term credit, as opposed to banks which could take weeks on top of many terms and conditions.

According to a loan shark who spoke to The New Times, most of their clients are often salaried workers looking for easy money to take them through the end of the month, people looking to solve urgent problems and problems. emergencies while others are businessmen looking for capital, say, to clear goods.

Employees looking for “small and quick” loans, according to another lender, often seek between 50,000 and 400,000 Rwf, repaid with interest.

Loans that exceed Rwf 1 million are those that often require assets such as cars.

A client who admitted to using loan sharks told the New Times that the amount loaned is rarely proportional to the value of the motor vehicle, the former being much higher.

Asked about the risk he puts his property at when dealing with loan sharks well aware that he could lose his motor vehicle, he played it down, saying he is always sure he will collect the loaned money and that its lenders are “reasonable” people.

Deputy central bank governor Monique Nsazabaganwa said the practice is illegal in the country and both lender and debtor can be sued.

As to whether legalizing and regulating the practice would ensure some order, Nsazabaganwa ruled it out.

“It is not possible to legalize such a practice. We have deposit takers and other registered lenders. The lender and the borrower flout the regulations, ”she said.

Nsanzabaganwa said that among the reasons the government discourages this practice is the fact that you are never guaranteed to get your property back and its interest rates are sky-high.

She said the central bank regularly conducts customer awareness campaigns to ensure the public is made aware of the legal credit options available.

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