Delays in loan repayments blamed for harsher collection methods

KUALA LUMPUR: The economic crunch is making it more difficult for moneylenders to collect loan repayments, so many are resorting to harsher methods.

According to an unlicensed moneylender who declined to be named, borrowers sometimes leave them with little choice in recovering their money.

“We give them reasonable time to repay their debt but some simply refuse to pay. They keep giving excuses and avoiding us, so we try to embarrass or scare them,” he said.

In the past, many would spray red paint on the debtors’ house or put up a banner with their identity card number outside when they don’t repay loans.

“But this has proven to be ineffective, so some have resorted to violence and will usually hire gangsters to do that. They are the ones who sometimes go too far and even cause death,” he said.

Asked whether some loan sharks would kill those who renege on their loan agreements, he declined to answer.

The country was rocked last week by the news of yet another case of violent treatment by loan sharks on their loan defaulters.

On Wednesday, police rescued three men who had been chained like dogs in a prison-like cell at an unoccupied shoplot in Seri Kembangan for about two months.

They were beaten daily and fed only water and bread while the loan sharks waited for their families to repay their debt.

Vick, who claims to be a legal moneylender, believes that part of the problem is that borrowers take unnecessary risks to get loans faster or borrow a larger sum.

“We try to lend only what people can afford to pay back because we don’t want to lose money. Our interest rates range from 10% to 30% a month. Some are so desperate for a loan that they agree to a 30% interest rate,” he said, adding that many loan sharks now demand collateral before forking out the money.

“Borrowers would pledge their household stuff, car or future salary but there are some who even offer their wives and daughters,” he said.

A former credit card “refinancer” who only wants to be known as Madam Hong agreed.

“There are many Ah Longs out there who are not gangsters or have no links to the gangsters. Moneylending is an old trade, and many know that Ah Longs’ interest rates are higher than the banks, so if they still want to borrow money from a loan shark, they know the risks,” she said.