Did you know that if you owed an unregistered mashonisa (loan shark) money you are not legally obliged to pay it back?
Even if they take you to court, they will not be able to claim interest as the contract would have been illegal and void.
This is according to the National Credit Regulator (NCR), a government body that advocates for a fair and non-discriminatory market place for access to consumer credit and promoting responsible credit granting and credit use and effective redress.
Typically, mashonisas are unregistered or unscrupulous lenders who offer loans at extremely high interest rates and use aggressive collection practices. These lenders often target vulnerable individuals who may not have access to traditional credit channels.
According to the law, any money lender must be duly registered with the NCR, which is a prerequisite to monitor compliance in terms of the National Credit Act. Lenders must be certified by the NRC and this certificate must be clearly visible in their business premises.
Nthabiseng Sefudi, a legal adviser at the investigations department within the NCR, said there has been a rise in illegal lenders in SA – often offering quick loans without checking if the borrower can afford to repay and charging high interest rates.
“Some loan sharks will go as far as attaching your personal property, resort to violence or harassment due to nonpayment. The loan shark might go to the small claims court to recover monies, however, they will not be liable to claim interest. If the lender is unregistered, their customer is not obliged to pay as the contract would be unlawful and void. If they are registered the customer will need to pay to avoid legal consequences or judgment being obtained against them,” Sefudi told Sowetan Consumer.
Some loan sharks will go as far as attaching your personal property, resort to violence or harassment due to nonpayment. The loan shark might go to the small claims court to recover monies; however, they will not be liable to claim interest.
— Nthabiseng Sefudi, a legal adviser
A common practice among mashonisas is to keep their clients’ bank cards with their pins as surety and in most instances they personally withdraw what they are owed including interest before returning the cards to the borrower.
Two weeks ago, two loan sharks were arrested in possession of their clients’ IDs, bank cards and South African Social Security Agency (Sassa) cards. On Sunday, a man from Tembisa, Ekurhuleni was arrested with 200 Sassa cards, 500 IDs, about 400 bank cards, R51,000 cash, a speed point and exercise books which he allegedly used to keep records of loans.
Police in Malamulele, Limpopo, arrested another alleged loan shark who was found with 22 IDs and 42 bank cards, including Sassa cards believed to have been used to exploit vulnerable community members through illegal lending practices.
Sefudi said most people borrow from loan sharks in desperate need of financial aid, obtain quick loans and there is no affordability assessment conducted.
She advised borrowers to contact the NCR to verify whether a company or an individual is authorised to lend money. A registered credit provider should have an NCR registration number.
The violence
The illegal lending business can be dangerous and sometimes fatal to those who run it from their homes, as they become easy targets for criminals.
In March, an alleged mashonisa Floyd Makhubo, 37, from Etwatwa, Ekurhuleni, was gunned down by unknown men while playing pool at a tavern. His death was believed to have been revenge as Makhubo was reported to terrorise those who owed him by sometimes taking ownership of their property or kidnapping them.
In June, Sabata Motaung from Duduza, in Ekurhuleni, was killed during a home robbery. The robbers also took his clients’ bank cards and Sassa cards, with pin codes attached to them, and emptied their bank accounts. Scores of Motaung’s clients were left penniless and stranded for June as they had lost all their money.
Targeting the vulnerable
A year ago, the Black Sash, a human rights organisation, urged the government to use an integrated approach to deal with illegal loan sharks who target social grant recipients and charge them exorbitant interest rates.
At the time, the NGO had just launched a report into how loan sharks were taking advantage of desperate social grant recipients and with reckless and uncontrolled lending. The report also observed that the practice of illegal lending has intensified, especially among elderly people and single mothers who are grant recipients and do not qualify for formal loans.
“It is important to highlight that SA has a very high unemployment rate. Moreover, there are structural socioeconomic differences that create and perpetuate the vulnerability of women to be targeted by unregistered lenders,” said the organisation’s spokesperson Mongezi Mhlongo.
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