Money lenders seek reprieve

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MASERU — Three money lending institutions on Monday urged the High Court to allow them to continue deducting money from civil servants until the Appeal Court has ruled on the matter.
The High Court last month ordered Select Management Services, Afrisure (EEZY Management Services) and B-Blue Financial Services to stop deducting money from civil servants.
Civil servants accused the financial institutions of charging exorbitant interest rates prohibited by the law.
High Court judge Tséliso Monaphathi ruled last month that the money lenders were indeed flouting the law by charging higher interest.
The money lenders have since appealed against the decision.
On Monday, the money lenders urged Justice Monaphathi to suspend the execution of his judgment pending a decision by the Appeal Court next April.
Advocate Johan Daffue who is representing B-Blue said Monaphathi should grant their application to stay execution as his clients had a chance to win on appeal.
“Since we have prospects of success on appeal I pray that this application of stay of execution be granted,” Daffue said.
Daffue said his clients will suffer harm if they stop collecting money from clients as ordered in the judgment.
He said the borrowers should continue paying their debts saying if the Court of Appeal confirms the High Court judgment, B-Blue would refund the borrowers.
But his argument on reimbursement was strongly dismissed by the civil servants’ lawyer, Advocate Kananelo Mosito.
Mosito said B-Blue could not pay back his clients in the event that it loses on appeal because it is insolvent.
“It is impossible that B-Blue can refund my clients because it is insolvent.
“One of my clients alleged in the court papers that B-Blue cannot be able to refund them (civil servants) because the company is insolvent.
“That allegation was not denied in papers. I take it that the allegation is true.
“How can they pay us when they are insolvent?” Mosito asked.
Mosito also said if the court allows the application of stay of execution it would mean that the court allows the illegality, which the court had already found, to continue.
“In the circumstances I submit that this application should be dismissed,” Mosito said.
However, Daffue denied that B-Blue was insolvent.
“My instruction is that my client is not insolvent,” Daffue said.
The money lenders had also asked for the alternative relief allowing them to continue charging 25 percent interest on monies borrowed by civil servants until the Court of Appeal had ruled on the matter.
“Alternatively we are saying the borrowers should continue paying only the capital and the 25 percent interest until the Appeal Court has decided (on the matter),” Afrisure’s lawyer, Advocate Motiea Teele, said.
Teele said his suggestion was based on the fact that loans offered by the money lenders were not secured.
He said if the borrowers stop paying and the money lenders succeed on appeal it would be difficult to trace the borrowers.
“If your lordship refuses this application and the appeal is upheld the lenders will have to chase them (borrowers) because these are unsecured loans,” Teele said.
But Mosito strongly said there was nothing to be paid to the money lenders because the High Court had already ruled that they had charged illegal fees.
Selikane Motseko, the chairman of the Association of Money Lenders, said the dispute has highlighted the need to speedily review laws governing the money lending business.
“We feel the case is very important because it will help with the proper interpretation of what is meant by interest.
“This law has many gaps because it stipulates 25 percent as a proper interest rate. But it also allows for other charges,” Motseko said.
He said money lenders had already stopped granting loans to civil servants pending a decision by the Court of Appeal.
“We met with the central bank governor on Monday to inform him that we have already stopped trading pending the decision by the Appeal Court.
“It means we will stop trading until April when the court has decided on the matter.
“There is no doubt that we are going to lose out on profit but most people are going to lose too,” Motseko said.
Motseko said the money lending institutions were already considering retrenching staff as they had suspended operations.
 “We are still considering whether to retrench people because we need money to pay them. But we have now stopped operating until we know where we stand.
“This will take about six months,” Motseko said.
He said the money lending industry employed about 500 people.
Motseko said if the money lenders lose the appeal case they might have to wait until a new law has been enacted as the current law is already under review.
“If the money lenders lose the case we will have no alternative but to stop trading until the new law is in place.
“We cannot run business on 25 percent interest without adding administration charges.
“In fact we incur between 38 and 40 percent as administration costs. That is why we charge extra fees as administration charges.
“Otherwise we will be forced to close business,” Motseko said.

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