In the quarter of October to December 2014, the Namibia Financial Institutions Supervisory Authority (Namfisa) received 94 complaints from consumers regarding illegal operations of Micro-lenders.
The complaints ranged from overcharging, illegal deductions, non-cancellation, and extensions of the loan period and non-payment of refunds by micro lenders to consumers. However, Namfisa has already resolved 72 of these complaints.
To resolve these complaints, in cases of overcharging and illegal deductions, the lenders are ordered to repay these amounts to the borrowers.
For the period under review, an amount of N$23 005 was refunded to complainants as a result of service providers effecting illegal deductions while an amount of N$18 983 was paid as promised refunds to the complainants.
In addition, an amount of N$36 454 was paid to complainants as a result of deductions effected after the financial service providers failed to heed cancellation instructions.
Namfisa Spokesperson, Isack Hamata confirmed to The Villager that Namfisa has received complaints from consumers of financial services.
“The latest statistics for the quarter of October to December 2014 indicates that a total of 94 complaints were received and 72 of these were resolved already. Meanwhile, the complaints statistics for January to March 2015 are being collected and will be available in due course,” said Hamata.
Hamata adds that where lenders fail to heed Namfisa’s orders to refund borrowers or correct their lending practises, their authority is empowered to cancel the registration of the lenders.
Hamata added that in addition to the punitive measures, Namfisa has a dedicated consumer education programme, which it uses to educate consumers on their financial rights and responsibilities.
“These include issues like interest rates charged on loans, risks of signing blank financial contracts, over committing themselves through over borrowing,” said Hamata.
Hamata reaffirmed that a micro-loan is defined as a loan not exceeding N$50,000 and repayable over either a 30-day period (loans provided by payday lenders) or in equal monthly instalments over a period of up to 60 months (loans provided by term-lenders).
Namfisa regulates and supervises micro lenders in terms of the provisions of the usury act no. 73 of 1968 and the exemption notices issued thereunder.
Hamata added that Micro lenders registered by Namfisa are subject to a set of registration conditions and failure to comply with such conditions may result in cancellation procedures being instituted against such micro lenders.
“Micro lenders have limitations on their maximum finance charges (or interest in short). The term lenders may only charge interest calculated at the average prime rate charged by local commercial banks times two, i.e. 18,50 percent per annum. Payday lenders are allowed to charge a once-off all-inclusive rate of 30%,” said Hamata.
Some of the registration conditions for micro lenders are:
Hamata reiterated that loans to borrowers are confined to 50% of the borrower’s net salary (take-home salary), i.e. to qualify for a loan of N$1,000 the borrower should at least have a take home salary of N$2,000.
This is to ensure that borrowers still have disposable income to maintain themselves after the cash loan has been paid.
“Namfisa also has the prohibition on the signing of blank documentation by borrowers. In the past, situations often arose whereby borrowers would be required to sign blank documentation at the time of taking out the loan but now that practice has been prohibited by Namfisa,” said Hamata.
Namfisa also prohibits micro lenders from retaining the bankcard and pin of borrowers as security or for collection arrangement purposes.
Hamata noted that there is a prohibition on the retention of original identification documentation (ID) of borrowers; and the prohibition on the acceptance of deposits from the public.