The recent case of loan sharks charging RM500 for every 30 minutes delay in repayment is not an exaggeration. This case happened to an insurance agent who borrowed RM3,000 and paid the full amount. But, the loan shark demanded RM1,500 as charges for his late payment. The loan shark also threatened the borrower that he will cause injuries to the borrower and his family. Situations as such are ridiculous but true. This has stirred confusion among the general public.
Licensed Moneylenders vs. Ah Long
Many are confused with the general misconception that all moneylenders are ‘Ah Longs’ or loan sharks, who charge high-interest rate. In fact, there are legal moneylenders who are regulated by the government, more specifically by The Ministry of Housing and Local Government (KPKT). KPKT recently launched an initiative to rebrand registered licensed moneylenders as the ‘Credit Community’ with the purpose of changing the general public’s perception and exposure towards safe lending facilities.
Please note that money lending is not governed by Bank Negara. In case, a moneylender shows you a license by Bank Negara, it is most likely a fake license. Below is an example of a fake license.
Today we would like to expose the differences between ‘Ah Longs’ and Licensed Moneylender who follows the regulations, the Moneylenders Act 1951 (MA). The table below depicts the differences.
|LOAN SHARK / AH LONG||CRITERIA||LICENSED MONEYLENDER WHO COMPLIES WITH MONEYLENDERS ACT 1951|
|No one but themselves. They set their own rules.||Governed and Regulated By||Ministry of Housing and Local Government (KPKT).|
|Not licensed. Again, they set their own rules.||Licensing||Section 5(2) of MA requires them to apply licensing every 2 years.|
|Usually it is ‘sepuluh-tiga’ which comprises of 30% interest charged monthly. But they can also charge you as they like.||Interest Rate||Maximum 12% p.a (secured loans) and 18% p.a (unsecured loans).|
|There might be other hidden costs that they will set up as they like.||Other Charges||It consists of attestation and lawyer fees, credit check fees and stamp duty.|
|No loan agreement involved.||Loan Agreement||The loan agreement will be validated by a third party i.e. Lawyer, Legal Officer, Commissioner for Oaths.|
|It is unregulated and they advertise whatever they like.||Advertising||Under Section 11 of MA, they must apply permit for advertisements. Under Section 27A of MA, they are prohibited from employing agents or canvassers.|
|They will hold your personal belongings like IC, passport, bank cards, etc. as security deposit.||How to Apply||The standard loan documentation process involves a background check on documents like IC copy, salary slip, bank statement, EPF, etc.|
|Examples of extortion activities include splashing red paint, harassing and threatening to hurt the borrower’s family members.||How to Chase Bad Debt||They send reminders, hire debt collectors, issue letter of demand, set blacklist on CCRIS and CTOS or offer AKPK counselling services.|
|They charge whatever they like.||Charges for Late Payment||The charges are between 3-5% for late payment.|
|Borrowers are not allowed to make an early loan settlement because it does not bring profit to them.||Early Loan Settlement||Yes, they allow early loan settlement.|
Not to forget, here are some extra tips to shield yourself from dealing with an ‘Ah Long’. Better safe than sorry!
Tips to Protect Yourself from Ah Long
Tip 1: Check the company’s SSM number on the KPKT website
Tip 2: Check if they display their licensing at their office issued by KPKT, not BNM
Tip 3: Ensure that the loan offered by the lenders are in compliance with the Moneylenders Act 1951, particularly the interest rate is not above 18% per annum and the loan agreement is valid with proper loan documentation in place
Only apply for a loan with a financial institution that you trust. The best way is of course to obtain a loan from banks. However, banks can be pretty strict when it comes to their loan requirements especially with credit score. The best ways on how to improve your credit scoring are highlighted in our article.
In case you are low income or do not have a credit score, you still have an option to obtain a safe loan from co-operative (koperasi), yayasan or licensed moneylenders that are reputable and legal. If you are in need of financing, check your loan eligibility for free with Direct Lending, an online personal lending platform that work with only reputable and licensed lenders.