Crackdown On Shady Money Lenders

[george]

Crackdown on shady money lenders

BANGKOK: -- The Bank of Thailand and four state agencies will today launch a concerted crackdown on about 1,000 illegal non-bank companies and 5,000 illegal personal-loan providers.

Besides the illegal lenders, any party found guilty of collaborating with them, ranging from distributors of flyers for their services to newspapers that carry their advertisements, will be punished, regardless of whether their involvement is direct or indirect.

Bank of Thailand (BOT) director Weerachat Sribunma said the authorities wanted to suppress these illegal financial businesses completely because they not only burdened borrowers with high interest rates but also had an economic and social impact on the entire country.

"Some debtors who cannot repay their debts get involved in football betting, drugs and prostitution," he said.

Pol Maj-General Visut Vanichbut, head of the Economic and Cyber Crime Division (ECCD), warned that all activities related to illegal loans would be targeted.

First, the Bangkok Metropolitan Administration (BMA) will impose the maximum fine of Bt2,000 on anyone found putting up posters or handing out leaflets advertising illegal loans.

Pol Colonel Pichai Kriengwatanasiri, deputy director-general of the City Law Enforcement Department, said the BMA would collect such leaflets and advertisements and forward them to the BOT and ECCD to help them find the ringleaders.

Visut said the BMA would replace such advertisements with those of legal non-bank companies to guide potential borrowers in the right direction and so help eliminate the illegal operators.

There are 33 legal non-bank companies that are approved to offer financial services, but only 20 of them are operating. The major companies are Aeon Thana Sinsap (Thailand), Cetelem, Easy Buy, GE Money and Capital OK.

Moreover, anyone who places advertisements for illegal loans in newspapers will be given the maximum sentence of three months in prison and a Bt30,000 fine. Newspapers will be fined half this amount because technically they are giving indirect support to an illegal activity, according to the Office of the Consumer Protection Board (OCPB).

Weerachat said the Revenue Department would retroactively probe tax payments by 5,000 shops, including gold and electrical-appliance shops, suspected of involvement in illegal lending. These loans are popular with some people, but the authorities are determined to stamp them out as they lead people into more and more debt.

For example, a person buys a gold chain worth Bt10,000 from a gold shop using a credit card. He/she does not get the chain and is only given Bt8,000 by the shop, which also deducts Bt2,000 as an agent's fee.

So, the buyer only receives Bt6,000, but owes Bt10,000 to the credit-card issuer.

Aeon Thana Sinsap executive director Apichart Nantaterm said illegal lenders have been using this tactic for some time.

Aeon has monitored the business on a regular basis by calling the phone numbers advertised in the media or posted on electricity poles. Many of the shops involved in this scam have been found guilty and have been banned by the card service, he said.

The BOT has asked Aeon for more information to help eradicate such loan sharking.

Operators of illegal non-bank companies and shops involved in this rip-off will be sentenced to the maximum one year in jail and fined Bt20,000.

"If we can put 5 per cent of these shops out of business, the others will pull out of the business for fear of being caught," Visut said.

As of yesterday, operators of 32 illegal non-bank companies had been arrested and people at 31 of these companies had been sentenced. Legal proceedings are ongoing in one case.

In addition, Visut warned credit-card holders to beware of fake credit-card gangs who copy electronic data from cards and transfer it to a blank card that they then use to withdraw cash and make fraudulent purchases.

-- The Nation 2007-12-08

[astral]

How will this affect the people who lend money at 5-10% per month?

There are a lot more than 5000.

[cm-happy]

This great news. 32 operators already arrested! Thai Police can be efficient and effective when they want to.

[Martin]

'Astral' asked: "How will this affect the people who lend money at 5-10% per month?

There are a lot more than 5000."

I, too, was appalled at such apparently excessive interest rates when I first came here.

But often there is so much hassle in getting repayment of the loan that the lender is not all that well recompensed.

The preying on the vulnerable should be curbed, and all praise to the Government for tackling it, but "Prevention is better than Cure".

I would like to see a lot more emphasis being put on the topic of 'Personal Money Management' during the schooling years.

It is not enough to leave it to the parents, as a lot of parents are weak on the matter themselves.

One thing that struck me as strange in the OP was the description of gold shops giving out cash. Why don't people just go in a bank and take a Cash Advance on their credit card?

[soundman]

Seeing this through to fruition will be tantamount to kicking all those with Chinese ethnicity out of Thailand...

[mijan24]

How will this affect the people who lend money at 5-10% per month?

There are a lot more than 5000.

Astral - Agree and unfortunately once they are in the grip of these loan sharks some people never get to repay the principle only the ongoing interest charges - lets hope they sort a few out at least.

[KireB]

As many things in this beautiful country: words and nothing more!

Or: bla bla bla!

[Tony Clifton]

Every single Thai that has set foot in this house , with the exception of two close friends and all of the wive's relatives, has asked to borrow money at some point. The last one, a few days ago, had gone nuts playing cards on a company holiday but told us her and her boyfriend had found a young boy at the hospital who needed urgent care Champagne lifestyles on beer wages.

[astral]

Many never redeem the loan.

I visited one of these sharks when searching for a piece of land for a Thai.

The guy had a whole pile of land deeds he had "acquired" through defaults in loans.

[raro]

My two cents:

#1: My ex-gf had a salary of 10,000 Baht but was issued 5 or 6 credit cards with a limit of 15 to 25 k each. She used those cards randomly so that we had 5 or 6 different bills every month..and yes, there was at least one per month that slipped our attention and a late payment fee was charged. Further, the toal credit amount of about 150,000 Baht versus a 10,000 Baht salary is asking for trouble....

#2: A colleague of my ex-gf, also with a salary of some 10,000, borrowed in total about 60,000 Baht from various "friends" against horrendous interest rates. She was not able to pay back the principal as only the interest was more or less her monthly salary. I offered her to settle all her debts against 5% p.a. under the condition that the company she works with transfers 5,000 Baht per month directly to my bank account so that she cannot get a hold of it. She would have been clean within a year....never heard from her again!

[Seneque]

If 'legal' banks were doing their job properly ... people would not be that scared to deal with them ...

People borrowing outside the system know they will never be able to repay the capital. (if you are a lender just get hold of these 'land deed' or whatever car / computer ... they might have)

Most people borrow for things they absolutely do not need (ex: a friend of mine has a factory. He just 'employed' a girl on a 3 month trial ... the next day she came to the factory riding a brand new bike ... responsability : yes for sure , there is no tomorrow ... and do we have to blame them, not so sure!)

[yaketyak]

I never quite understand the hysteria that these money lenders seem to generate both in Thailand and here in the UK.

You have to remember that these people are exactly the ones who cannot go to the banks because they have a terrible credit history or they have insufficient income.

These loan sharks take on a big risk in that they are dealing with unreliable people who say one thing but don't do it (ie pay back the money) so of course to outweigh the risk the rates must be much much higher than the banks .

I feel more sorry for those in Thailand who are genuinely poor as opposed to those in the UK who , largely speaking , are not

[soundman]

I never quite understand the hysteria that these money lenders seem to generate both in Thailand and here in the UK.

You have to remember that these people are exactly the ones who cannot go to the banks because they have a terrible credit history or they have insufficient income.

These loan sharks take on a big risk in that they are dealing with unreliable people who say one thing but don't do it (ie pay back the money) so of course to outweigh the risk the rates must be much much higher than the banks .

I feel more sorry for those in Thailand who are genuinely poor as opposed to those in the UK who , largely speaking , are not

I'm probably going to get shot down in flames for supporting this, however, in plain English, this is one of the best posts I have seen with regards to expensive interest.

Says it all. Good stuff!

Where is Heng?

Soundman.

[lioness]

Recently a Thai friend of mine ended up in dire straights after borrowing 35,000 from a money lender. He borrowed it about a year ago at a rate of 10% per month, which meant a repayment of 3,500 per month which he couldn't afford as he only earns 6,000 Baht a month. Why he went for this I will never know, anyhow at the end of 12 months the loan was now up to 103,000 Baht and they were coming to take his house.

The loan was from a money lender in a main town and he charged 5%, then this small country money lender on leant it with another 5% on top.

I wanted to contact the authoritites and have it looked at, this invoked sheer terror into the family as they said if that happens we would all end up dead.

OK he signed the loan and it was his stupidy, but even so this is a total rip off. I have been told that the Interest rate allowed by private money lenders is a maximum of 15% per annum.

Yes indeed, there should be money management lessons in school.

[kurtgruen]

How will this affect the people who lend money at 5-10% per month?

There are a lot more than 5000.

There are a lot of them in Chiang Mai, who get 20% per month. I hope they bust them all. Trouble is...I am sure some of you know who the "top" ones are and who is going to bust them? :-(

I think anyone who lends money at 20% interest per month, and takes advantage of the poor and misfortunate like that, should be shot on sight!

[markwhite]

Why don't people just go in a bank and take a Cash Advance on their credit card?

*If* credit cards here have the same sort of way of dealing with cash advances as those in the UK, they might be limited to being able to drawdown a certain percentage of the credit limit as cash. My ex-employers had accounts setup to ring alarm bells if more than 50% of the balance on a card was made of cash advances - either a few large ones or lots of little ones.

[Zpete]

Why don't people just go in a bank and take a Cash Advance on their credit card?

*If* credit cards here have the same sort of way of dealing with cash advances as those in the UK, they might be limited to being able to drawdown a certain percentage of the credit limit as cash. My ex-employers had accounts setup to ring alarm bells if more than 50% of the balance on a card was made of cash advances - either a few large ones or lots of little ones.

Cash advance on credit cards is dumb.

The interest starts immediately at some extortionate rate.

Simplest way is to use normal ATM card with PDA symbol, at ATMs showing same PDA symbol, and withdraw as much/little as ya like at anytime.

My New Zealand bank, ASB charges $NZ5.00 per transaction.

I am sure most banks around the world would be similar.

There ia 1% FX fee on top.

Safer than travellers cheques.

I always leave the card with minimal balance, topping it up via internet banking as required.

In Thailand ya have 3% tax on credit card charging as well, enjoy........LOL.

In Thailand, ya have immense chance of your credit card being compromised, I used mine in three visits, unfortunately, my bank put a limit after I returned home, and issued new cards which were normal creit. I now limit its usage to internet transactions, no 3& fee. Mainly accommodation, airfares and similar.

3 replacement cards this year..... woah!

Way to go now tho', ornery ATM cards.

Safest way to go.

Cheers all, happy spending.

[Zpete]

I never quite understand the hysteria that these money lenders seem to generate both in Thailand and here in the UK.

You have to remember that these people are exactly the ones who cannot go to the banks because they have a terrible credit history or they have insufficient income.

These loan sharks take on a big risk in that they are dealing with unreliable people who say one thing but don't do it (ie pay back the money) so of course to outweigh the risk the rates must be much much higher than the banks .

I feel more sorry for those in Thailand who are genuinely poor as opposed to those in the UK who , largely speaking , are not

I'm probably going to get shot down in flames for supporting this, however, in plain English, this is one of the best posts I have seen with regards to expensive interest.

Says it all. Good stuff!

Where is Heng?

Soundman.

No, ya rite, totally rite.

I would neva entertain advancing money anywhere, unless total security or hefty interest.

Even then doubt it.

Spot on "yaketyak"

[Gary A]

I never quite understand the hysteria that these money lenders seem to generate both in Thailand and here in the UK.

You have to remember that these people are exactly the ones who cannot go to the banks because they have a terrible credit history or they have insufficient income.

These loan sharks take on a big risk in that they are dealing with unreliable people who say one thing but don't do it (ie pay back the money) so of course to outweigh the risk the rates must be much much higher than the banks .

I feel more sorry for those in Thailand who are genuinely poor as opposed to those in the UK who , largely speaking , are not

I'm probably going to get shot down in flames for supporting this, however, in plain English, this is one of the best posts I have seen with regards to expensive interest.

Says it all. Good stuff!

Where is Heng?

Soundman.

Risk? BULL! There are VERY few unsecured loans. The sharks get up to 10 percent per month for loans mostly secured with land papers. Short term unsecured loans are risky but have interest rates MUCH higher than 10 percent per month. Those loans are the leg breakers or shooting loans. The unsecured loans are mostly the mafia and losses are easily absorbed.

[soundman]

I never quite understand the hysteria that these money lenders seem to generate both in Thailand and here in the UK.

You have to remember that these people are exactly the ones who cannot go to the banks because they have a terrible credit history or they have insufficient income.

These loan sharks take on a big risk in that they are dealing with unreliable people who say one thing but don't do it (ie pay back the money) so of course to outweigh the risk the rates must be much much higher than the banks .

I feel more sorry for those in Thailand who are genuinely poor as opposed to those in the UK who , largely speaking , are not

I'm probably going to get shot down in flames for supporting this, however, in plain English, this is one of the best posts I have seen with regards to expensive interest.

Says it all. Good stuff!

Where is Heng?

Soundman.

Risk? BULL! There are VERY few unsecured loans. The sharks get up to 10 percent per month for loans mostly secured with land papers. Short term unsecured loans are risky but have interest rates MUCH higher than 10 percent per month. Those loans are the leg breakers or shooting loans. The unsecured loans are mostly the mafia and losses are easily absorbed.

How? By forcing the local somtam vendor or shit collection service to pay more "job site protection money" because somebody else with poor financial management skills takes on a loan they can't afford to pay back just because they had to have a new mobile phone?

If you can't afford the cost of the money you want to borrow - don't borrow it.