Civil servants launch landmark class action against B Blue

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MASERU –– A group of 71 civil servants is suing B Blue Financial Services, a money-lending institution, over incidental charges associated with its loans. 

In an application filed with the High Court, the civil servants are seeking that the court declares as null and void B Blue’s incidental charges and other expenses relating to their loans.

They also want the court to order their employer, the government to stop deducting money towards repayment of their loans and incidental charges from their salaries.

They also claim that the financial institution is overcharging on its loan interest rates.

B Blue is charging 25 percent interest on loans. 

The applicants said B Blue was not entitled to recover charges in respect of administrative fee, insurance and initiation fee because the charges are in violation of the Money Lenders Order.

The said B Blue did not issue receipts after receiving money on loan payments.

The Money Lenders Order says a lender who fails to comply with any of the requirements of section 9, which demands issuance of receipts, is not entitled to force any claim for a loan.

They also want that the money they have already paid to B Blue for incidental costs, charges or expenses be set off against the amount actually lent to them.

The clients, who filed their lawsuit on July 7, are seeking an urgent hearing.

One of the applicants, ’Mamots’elisi Monyane, said in her affidavit that it was unlawful for B Blue to charge them administration, insurance and initiation fees.

She further argued that B Blue should not charge interest in excess of 25 percent per annum.

“For example, it is clear that 25 percent of the M15 100 loan amount is M3 775,” Monyane told the court in the affidavit.

“This means that in three years the first respondent (B Blue) would have to charge M11 325 as interest.”

“( B Blue) charges M13 623.18 as its interest which amount is not only in excess of that to which (B Blue) would be entitled, but also is in violation of Section 8 of the Money Lenders Order which requires that interest should not exceed 25 percent of the entire loan.”

 Monyane said the institution was enticing people into borrowing more money by urging them to settle their loans within the shortest possible time, yet their stipulated interest would not be affected.

“A borrower will still have to pay the principal loan, incidental charges as well as the interest irrespective of how short the period of being indebted to (B Blue) might be,” she said.

Monyane said the act was in violation of the Money Lenders Order in that it constituted a deceptive statement which had the effect of inducing them to borrow from B Blue.

“This is what happened to us in this case,”she said.

She added that the interest charged was compoundable because the finance charges were calculated monthly in arrears and added to the outstanding balance of the loan.

“This means that the interest charged is in excess of 25 percent contemplated by the law,” she said.

Monyane said Section 20 of the Order says if a sum is paid to a money lender by a burrower on account of costs, charges or expenses it shall be recoverable as a debt due to the borrower.

“I wish to inform this Honourable Court that all the applicants aforementioned have already paid administrative fees, insurance charges as well as initiation fees to (B Blues.”

“I aver that all such charges should therefore be set-off against the loans granted by (B Blue) to the applicants.”

“It will also be apparent that (B Blue) is running its business in a prejudicial manner against us in as much as we are required to either pay exorbitant charges, or pay charges that are prohibited by the law.”

Another client told the Lesotho Times that she had been loaned M6 000 and now she has to pay an extra M9 000 more than what she had actually taken.

Gugu Mokhoro said the B Blue bombarded them with heavy financial jargon meant to hide the actual meaning from a layman.

“These people hide behind the terminology used in describing these and for some charges they are even higher than the interest rate itself,” Mokhoro said.

“My life is a nightmare and I have realised that even if one attempts to pay a lump sum so as to settle this debt, like one of my friends did, it is useless because the other charges will still be there.”

Mokhoro said she is now worse off than when she applied for the loan.

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