Banks, Quasi-banks And Loans

[chevykanteve]

BOT may shut down nonbank companies for illegal lending

The Bank of Thailand (BOT) has threatened to shut down non-bank companies if they are proven to be involved in illegal lending which is currently widespread around the nation.

Weerachat Sribunma, director of Legal and Litigation Department, said he personally believes that some non-bank companies are involved in illegal lending and charging high interest rates.

He said the BOT would also seize card reader devices from any shop where its employees have been involved in illegal lending. The central bank will file lawsuits against the shops as supporters of fraud should their involvement prove significant.

The Nation

I wonder if "nonbank (sic) companies" would include the ubiquitous money lenders? If, for example, I knew someone who has been paying 7,000 baht per-month for years now, of which 6,000 is interest (dork bia), would that be considered an illegal amount of interest under Thai law? And if the person paying this amount each month is the Thai wife of a farang and the lender is a Thai (not of low rank and working for a government-related lending operation, no less), would the Central Bank really do something??? Hypothetically, if (somut wah) the Thai lender in question was an official of this type, would something actually be done? I wish to emphasize that this question is purely hypotetical, because all of us living here know that a scenerio such as this would be highly unusual..... right????

I'm sure others out there would also be curious about the hypothetical answer to this hypothetical question.

[soundman]

As far as I know, it is not illegal for individual's (thai or falang), to lend money in thailand. It is illegal for non-liscensed organisations to lend money.

The maximum rate of interest allowed is 1.50B (1.5% per month). Unscrupluous money lenders charge between 5.00 - 10.00B (dork bia) per month. Obviously these dodgy money lenders take little or no collaterol, & use certain collection tactics.

Cheers,

Soundman.

[ronw]

there is a money lender here who preys on the villagers.....

they borrow cash from the village fund,which is loaned interest free for one year....some borrowers arrive at the repayment time with not enough money to repay the whole loan....so the go to the money lender..who will advance the difference between what they have saved, and what they need...the loan is granted for only three or four days.....and the interest charged...............?

would you believe,,,twenty (yes 20) percent.....?usury is not the word for it!!!!

[soundman]

there is a money lender here who preys on the villagers.....

they borrow cash from the village fund,which is loaned interest free for one year....some borrowers arrive at the repayment time with not enough money to repay the whole loan....so the go to the money lender..who will advance the difference between what they have saved, and what they need...the loan is granted for only three or four days.....and the interest charged...............?

would you believe,,,twenty (yes 20) percent.....?usury is not the word for it!!!!

I would believe it. (As previously posted) I see it at the end of every month. 100 people Q'd up to renew the money Toxin gave them to be "lazy" for backing his political aspirations, all vieing in a bidding session (loans start at 5.0B for a week through to the stragglers paying up to 20.0B per week) with the local sharks, so they can pay back the old loan & receive a new one.

Soundman.

Absolutley despicable, & the brainless morons still back TRT.

[churchill]

As far as I know, it is not illegal for individual's (thai or falang), to lend money in thailand. It is illegal for non-liscensed organisations to lend money.

The maximum rate of interest allowed is 1.50B (1.5% per month). Unscrupluous money lenders charge between 5.00 - 10.00B (dork bia) per month. Obviously these dodgy money lenders take little or no collaterol, & use certain collection tactics.

Cheers,

Soundman.

I found that in Koh Samui money lenders normally charged 3% a month with land papers as guarantee . They never what to pay the tax , up to the borrower , and wil not give a receipt of any kind for the interest paid -

It would be nice to think that these people could be put out of business - I think the best way would be for Thailand to open up their banking system making it easier for people who have good assets or earnings to borrow at decent interest rates - as happens in the UK etc .

[cclub75]

I wonder if "nonbank (sic) companies" would include the ubiquitous money lenders?

It's very unlikely.

The problem of the BOT is the companies who issue for instance "credit card" or "shopping cards" and who charge high interests.

I really do not believe that the BOT would even dare to go after... individual loan sharks. I mean : the task would simply be impossible !

They are sharks, okay, but they are there since.... always. And for sure, they are part of the financial system of the country.

[Gary A]

Soundman has is correct. The maximum that can legally be charged is 15 percent per year interest. The sharks are getting 7 to 10 percent per MONTH. Against my objections my wife made a loan to a woman who was paying 8 percent per month. My wife paid off the shark and got the land paper for 7 rai from the shark. My wife and the lady went to the land office and my wife now holds the legal mortgage on the 7 rai. The 15 percent interest is better than I have been doing in the stock market, so how can I complain? If the loan plus the 15 percent per year is not paid at the end of the five year term the land belongs to my wife.

My wife had about 200,000 baht in the bank and it is all loaned out. People still come to the house and want to borrow money. I refuse to loan any of my money and my wife is now broke so she has to tell them the bank is now closed.

It's a shame that ignorant people lose their land to the sharks but it does indeed happen. It's not legal but they do not dispute giving up their land when the time to pay off the loan comes and they can't pay. This is an area where the government could prevent a lot of grief but the sharks are still doing business as usual.

[oooooo]

sad as it is this practice continues to flourish here in thailand. the thaksin 1 govt had this issue on it's election platform list. "ya hai krai goo ngoen nork rabop nai dork bia sung sung". which of course was a promise to the electorate to lower their interest rates and make official loans more easily accessible to them.

populist policies. haha, can i get a subsidy for my cat mr toxin?

illegal money lending continues here in many ways, shapes, and forms. the sharks sometimes come from well known syndicates including mafia, police, army, and municipality figures.

interest rates might come in at up to 20% a week depending on the nature of the loan. that keeps money collectors busy and the hospitals get some work as well.

the main reasons for loans like this are gambling, drug addiction or some other vice.

stay well clear

[monty]

If the loan plus the 15 percent per year is not paid at the end of the five year term the land belongs to my wife.

Unfortunately it's not as clear cut as that!

When the borrower defaults on the loan, a civil lawsuit has to be started against the defaulter. Lots of legal costs involved, and the judges always will try to negotiate a settlement, like extend the payment period, lower monthly payments etc.

If the defaulter uses all delay tactics allowed by the law, a civil case will take on average between 4 and 5 years to come to a conclusion!

Land and house department can only transfer the land in your wife's name after ordered by a judge, even though it will be clearly marked on the back of the land title deed that the deed has been registered as collateral (and the registration tax has been paid)...

[astral]

Perhaps the BOT should take a look at South Africa where they are encouraging the Micro Lending industry

for the less advantaged members of society......................

It is aimed at reducing the local Loy la Sip 10% (per month) interest rates

which exist over there, just as much as in Thailand.

[soundman]

Soundman has is correct. The maximum that can legally be charged is 15 percent per year interest. The sharks are getting 7 to 10 percent per MONTH. Against my objections my wife made a loan to a woman who was paying 8 percent per month. My wife paid off the shark and got the land paper for 7 rai from the shark. My wife and the lady went to the land office and my wife now holds the legal mortgage on the 7 rai. The 15 percent interest is better than I have been doing in the stock market, so how can I complain? If the loan plus the 15 percent per year is not paid at the end of the five year term the land belongs to my wife.

My wife had about 200,000 baht in the bank and it is all loaned out. People still come to the house and want to borrow money. I refuse to loan any of my money and my wife is now broke so she has to tell them the bank is now closed.

It's a shame that ignorant people lose their land to the sharks but it does indeed happen. It's not legal but they do not dispute giving up their land when the time to pay off the loan comes and they can't pay. This is an area where the government could prevent a lot of grief but the sharks are still doing business as usual.

Gary A your can legally charge 18% per annum on the loans. 1.5% per month x 12 months = 18%. (However the 1.5% per month is compoundable, if the borrower misses payments).

It would be a great business if there weren't such high rates of default on loans & lots of collection costs.

Cheers,

Soundman.

[Khonwan]

There is much rubbish spoken about this subject. Presumably the collective users of the term "shark" include all people who offer loans in excess of the legal limit of 1.5% per month. As one such person who often has done so in the past, and someone who knows a great many people who have done so (more who have done so than who do so), let me tell you that I've never heard of anyone around my district that has collected repayment with menaces. Most have simply lost money through defaulters and have stopped lending.

Many, and I include myself, have only agreed to lend after much pleading by friends who have (like most people out in the sticks) no recourse to the formal lending sector.

And why do we then lend at rates in excess of 1.5%? Because the borrower will always pay off the more expensive loan first!

Rather than beat gums about this issue without any understanding, consider the causes (I'm restricting my argument to the plight of farmers, which most people in Thailand still are, as indeed am I). Most farmers, and hence most Thais, are forced to borrow from the informal sector (which cannot secure their loans and therefore charge high rates!) because they have no or little access to the formal sector. In my entire District, there are only 2 (rich, well-connected, Thai) people who have clear land title (chanote) to their land. Without this, land cannot be used as collateral by banks. Only recently (under Thaksin) was the law improved slightly in that Sor Por Kor land could be used as collateral for loans granted by the government owned Bank of Agriculture and Agricultural Cooperatives (BAAC), and those loans cannot exceed 50% of the arbitrary value assessed by BAAC (some posters on other threads believe Sor Por Kor can be used for commercial bank loans - they are incorrect). To complicate matters, Te Sor Por Kor is extremely slow to release the Sor Por Kor documents that are the obvious requirement for a BAAC loan.

Without the informal sector (so called sharks), what can farmers do? They simply have no resources to purchase seed and prepare their lands for cultivation. Nor have they resources to pay for the ever spiralling high costs of fertilisers, insecticides and weedkillers that they absolutely require if they are to eat in the following year.

Issues are never black and white - there are many shades of grey in between.