Crackdown on shady money lenders

Crackdown on shady money lenders

The Bank of Thailand and four state agencies will today launch a concerted crackdown on about 1,000 illegal non-bank companies and 5,000 illegal personal-loan providers.

Published on December 8, 2007

Besides the illegal lenders, any party found guilty of collaborating with them, ranging from distributors of flyers for their services to newspapers that carry their advertisements, will be punished, regardless of whether their involvement is direct or indirect.

Bank of Thailand (BOT) director Weerachat Sribunma said the authorities wanted to suppress these illegal financial businesses completely because they not only burdened borrowers with high interest rates but also had an economic and social impact on the entire country.

"Some debtors who cannot repay their debts get involved in football betting, drugs and prostitution," he said.

Pol Maj-General Visut Vanichbut, head of the Economic and Cyber Crime Division (ECCD), warned that all activities related to illegal loans would be targeted.

First, the Bangkok Metropolitan Administration (BMA) will impose the maximum fine of Bt2,000 on anyone found putting up posters or handing out leaflets advertising illegal loans.

Pol Colonel Pichai Kriengwatanasiri, deputy director-general of the City Law Enforcement Department, said the BMA would collect such leaflets and advertisements and forward them to the BOT and ECCD to help them find the ringleaders.

Visut said the BMA would replace such advertisements with those of legal non-bank companies to guide potential borrowers in the right direction and so help eliminate the illegal operators.

There are 33 legal non-bank companies that are approved to offer financial services, but only 20 of them are operating. The major companies are Aeon Thana Sinsap (Thailand), Cetelem, Easy Buy, GE Money and Capital OK.

Moreover, anyone who places advertisements for illegal loans in newspapers will be given the maximum sentence of three months in prison and a Bt30,000 fine. Newspapers will be fined half this amount because technically they are giving indirect support to an illegal activity, according to the Office of the Consumer Protection Board (OCPB).

Weerachat said the Revenue Department would retroactively probe tax payments by 5,000 shops, including gold and electrical-appliance shops, suspected of involvement in illegal lending. These loans are popular with some people, but the authorities are determined to stamp them out as they lead people into more and more debt.

For example, a person buys a gold chain worth Bt10,000 from a gold shop using a credit card. He/she does not get the chain and is only given Bt8,000 by the shop, which also deducts Bt2,000 as an agent's fee.

So, the buyer only receives Bt6,000, but owes Bt10,000 to the credit-card issuer.

Aeon Thana Sinsap executive director Apichart Nantaterm said illegal lenders have been using this tactic for some time.

Aeon has monitored the business on a regular basis by calling the phone numbers advertised in the media or posted on electricity poles. Many of the shops involved in this scam have been found guilty and have been banned by the card service, he said.

The BOT has asked Aeon for more information to help eradicate such loan sharking.

Operators of illegal non-bank companies and shops involved in this rip-off will be sentenced to the maximum one year in jail and fined Bt20,000.

"If we can put 5 per cent of these shops out of business, the others will pull out of the business for fear of being caught," Visut said.

As of yesterday, operators of 32 illegal non-bank companies had been arrested and people at 31 of these companies had been sentenced. Legal proceedings are ongoing in one case.

In addition, Visut warned credit-card holders to beware of fake credit-card gangs who copy electronic data from cards and transfer it to a blank card that they then use to withdraw cash and make fraudulent purchases.

Anoma Srisukkasem,

Somruedi Banchongduang

The Nation