A new law is being drafted to license, regulate and supervise moneylenders and for the protection of borrowers as various unscrupulous parties are found to be exploiting the hapless consumers, the Central Bank said.
The Central Bank said it has received complaints in relation to various scams, exponentially high interest rates, harassments to customers and misuse of confidential customer information by certain moneylenders.
“The Central Bank of Sri Lanka has observed that advertisements and other forms of communications are made through various channels, including print, electronic and digital media offering loans. Complaints have been made on certain irregularities in this regard,” a statement said.
As there is a certain section of the population, who are either unbanked or not own security assets, Sri Lanka has an unregulated, yet thriving lending market operated by various individuals and unregulated parties, often at exponentially high rates.
These individuals or outfits, identified as loan sharks, operate freely taking advantage of the lax or absence of laws.
Until recently Sri Lanka’s microfinance sector, which is still waiting to be regulated, is also alleged to have acted as loan sharks, charging rates as high as 50, 60 or even
There were many incidents reported, where beneficiaries of such micro loans getting trapped in debt spirals, while some cases ended up in tragedies as a result of not being able to service such loans.
“As per the existing legal framework, moneylenders do not come under the licensing or regulatory regime, unless they accept deposits.
“Therefore, the CBSL along with the Finance Ministry has taken action to draft a law for licensing, regulating and supervision of moneylenders and protection of customers. The said law is currently in the drafting process and is expected to be enacted in the future,” the statement said.
Under these circumstances, the Central Bank has advised the public to exercise due diligence and care to avoid becoming victims of the scams operating in the guise of money lending businesses.
“The public should obtain full information before entering in to an agreement for a financial transaction. Further it is advised to reply on regulated entities entering in to financial transactions”, the Central Bank statement added.