Tuesday, 24 March 2015

Neither a borrower nor a lender be

(This first appeared in the New Era of 14 January 2015)

The headline for this week’s column is borrowed from a soliloquy by Polonius in William Shakespeare’s Hamlet where Polonius is giving advice to his son Laertes before Laertes heads back to school.

“Neither a borrower nor a lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.”

The past month I took my annual leave and I was fortunate to have it coincide with the birth of my son. I would strongly urge fathers (and lawmakers take note) to be there for your child's first few weeks or even months. It makes you appreciate the mother more, and sharing the sleepless nights and stomach cramps does wonders for your relationship. The best part must be the smiles you get for no apparent reason while you child falls asleep in your arms. This is the best investment any father can give and I trust the “return on your investment” will be worthwhile in the long run.

While on leave I noticed a public notice in the newspaper placed by the Namibia Financial Institutions Supervisory Authority (NAMFISA). In the advert, NAMFISA notified all Hire Purchase Outlets and Credit Grantors that the maximum finance charges as per the Usury Act of 1968 is 15.60 percent per annum. NAMFISA has as one of its objectives the protection of consumers of financial services and in this regard administers the Usury Act.

Few consumers fully understand what usury is, how the Authority regulates maximum finance charges and how the consumer can make use of NAMFISA to ensure they are not being overcharged (abused).

First, what is usury? Usury is the practice of making unethical or immoral monetary loans intended to unfairly enrich the lender. In plain English it means the lender is being made to pay too high interest on a loan. Thus the Usury Act is a law to prevent abuse of lenders and puts a maximum rate at which interest can be charged.

Some of the main objectives of the Usury Act, (Act No. 73 of 1968), are to regulate the maximum finance charges (or interest in short) and to ensure that terms and conditions of credit agreements, including Hire Purchase Agreements, are explained to customers and that fairness prevails in all contracts relating to all credit agreements.

In the public notice, Hire Purchase Outlets and Credit Grantors are reminded that the maximum finance charges or interest is calculated at the average prime rate times 1.6 which is currently at 9.75%. Thus the maximum interest that can be charged is 9.75 times 1.6 which equal 15.60 percent per annum.

Thus you as a consumer are protected under the Usury Act from any credit grantor (such as a money lender) from charging more than N$ 15.60 per year on every amount of N$ 100. If you are taking a loan for a shorter period such as a month, the interest rate must be divided by the percentage of the year the loan is granted. In other words, if you are taking a loan for one month, the interest may not be more than 15.60 divided by 12 thus 1.30 percent. If you have taken a loan from a money lender (and we all know how our January finances are), and are repaying at the end of a month, make sure they are not charging you more N$ 1.30 for every N$ 100 you are loaning.  Please note that certain lenders also charge administrative fees which are separate from the interest charged on the loan.

If you as a consumer have any queries, kindly contact the Microlending and Credit Agreements Department of NAMFISA at telephone number (061) 290 5000 (main), Ms. Lucrecia Lombardt at 061 290 5130 or e-mail: llombardt@namfisa.com.na.

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