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CB says working with Finance Ministry to draft new law to license moneylenders
Calls on public to be cautious in the meantime
Gives check-list to follow when selecting moneylender
The Central Bank yesterday said it was in the process of drafting a law for regulating moneylenders to protect customers but called on the public to be careful of money lenders and to do due diligence before agreeing to any loans in the meantime.
The Central Bank of Sri Lanka (CBSL) has observed that advertisements and other forms of communications are made through various channels, including print, electronic and digital media, offering loans.
Complaints have been made on certain irregularities in this regard. There are some allegations regarding scams, while some are complaining on high interest rates, harassment to customers and misusing of confidential customer information by such moneylenders.
A moneylender could be described as a person who carries on or advertises or announces himself or holds himself out in any way as a lender of money on interest, with or without security.
As per the existing legal framework, moneylenders do not come under a licensing and regulatory regime, unless they accept deposits.
Therefore, CBSL with the Ministry of Finance has taken action to draft a law for licensing, regulation and supervision of moneylenders and protection of customers. The said law is currently in the drafting process and is expected to be enacted in the near future.
In view of these observations, the public is advised to exercise due diligence and care to avoid becoming victims of the scams operating in the guise of moneylending businesses. The public should obtain full information before entering into an agreement for a financial transaction. Further, it is advised to rely on regulated entities when entering in to financial transactions.
The Central Bank recommended that the public should enquire the legal status of the moneylender, the contact details of the Chairman, Chief Executive Officer, or other principal officers, be clear about all the matters relating to the loan, the tenure of the loan, the interest rate, basis of interest rate calculation, repayment frequency, how to verify the details of the transaction, such as the outstanding balance, amount in arrears, default charges, etc. and additional charges/penalties, in the event of delayed payment.
Borrowers should also avoid providing personal information, especially bank account related information unless you have clearly identified the party that you are intending to transact with, do not sign any documents if you cannot read or understand the content of such document, do not sign on blank papers, do not allow others to fill the forms, and provide your personal information for the purpose, unless you can completely trust such persons and do not enter in to agreements hastily.
