• Sat. Aug 20th, 2022

Borrowers Shown How to Beat Money Lenders who Hide to Take Mortgaged Property

UGANDA, Kampala | Real Muloodi News | Unethical lending practices continue to cause desperate Ugandans to lose personal property worth millions to money lenders.

Many Ugandans have been taken advantage of by dishonest money lenders due to their ignorance of the law, and as a result, they have lost their properties under mysterious circumstances.

The lender’s concealment strategy on payment due dates, which converts borrowers into defaulters and results in the loss of collateral property, is particularly noteworthy.

Borrowers are frequently required to sign off on their property so that it seems like they sold it to the lender. The signed contract is intended to act as a guarantee, but the lenders use it as a pretext to seize the borrower’s possessions.

Many debtors have unintentionally lost automobiles, homes, and land for free.

Consider George David Wakanyira, a former principal accountant in the Kampala City Council, who accused Ben Kavuya of stealing his hostel in Bugolobi.

Wakanyira claimed to have purchased the property between 2006 and 2007 using a USh130 million loan facility received from Housing Finance Bank, according to the commission of investigation into land problems. But because he was unable to pay back the loan, his home was put up for sale.

In addition, Wakanyira claims that out of desperation, he borrowed another loan from Ben Kavuya’s company, Global Capital Savings, now known as Legacy Credit Limited, for USh170 million. He acquired this second debt and utilized it to pay off the previous debt.

He signed a loan agreement, a sales agreement, and roughly four additional blank documents, one of which seemed to be a transfer form, according to Wakanyira.

He recalls being requested to make a six-month repayment plan with a monthly interest charge of 10%. Wakanyira was consequently expected to repay USh170 million plus USh102 million in accrued interest.

He told the commission that he thought the agreement would serve as security if he couldn’t repay the loan.

Due to anxiety, he was unable to query the purpose of the blank documents.

Wakanyira claims that Kavuya had taken possession of the property and given the land to Rutungu Properties Limited, a business he runs with his wife and son, in two months, much ahead of the predetermined return time.

Wakanyira was paid USh272 million as payment for the sale of the property, according to a sales agreement that Kavuya then submitted.

Wakanyira filed a lawsuit at the High Court Commercial Division in Kampala after becoming aware of the transfer of his property against Kavuya, Global Capital Saving Company, and Rutungo Properties Company.

While in court, Kavuya provided a sales agreement and transfer documents signed by Wakanyira.

Wakanyira, however, was unsuccessful in the lawsuit because there was insufficient proof of a fraudulent transaction. The lawsuit was dismissed by the court.

However, Wakanyira was not satisfied with the verdict and filed an appeal, which is now pending in court.

Does the Involvement of Police Help?

According to Edward Ochom, the Director of the recently established Directorate of Greater Kampala, money lending has become a concern.

Ochom claims that numerous individuals have been up to report incidents to the police in which they claim they were duped into signing off on their property.

He adds that because the lenders submit the sale agreements and transfer documents, the police have very little power.

According to Ochom, the police merely recommend that the public avoid lenders who have unjust terms.

Ochom says, only parliament has the power to protect the populace by passing legislation that the police can implement.

How to Protect your Mortgaged Property from Money Lenders

Due to their ability to make payments through the Uganda Microfinance Regulatory Authority (UMRA) if the lender disappears, Ugandans who borrow money from money lenders are protected against losing their possessions.

In Uganda, the regulating authority for money lenders, non-deposit institutions, and microfinance organisations is called UMRA. They are responsible for ensuring compliance with these players’ rules as well as streamlining the sector’s practices.

“We are mandated to receive money from borrowers under circumstances when the lenders fail to abide by the loan agreement entered between the two parties,” says Edith Namugga Tusuubira, the UMRA executive director.

The Microfinance Institutions and Money Lenders Act of 2016 provides UMRA with this task.

This choice, though, only applies to loans taken out from authorized lenders; otherwise, the authority is at a loss for ideas.

What to Avoid When Taking a Loan

Never Sign a Sales Agreement/Transfer Forms

Namugga asserts that it is unlawful to execute a sales agreement or other transfer documents for the intended collateral when obtaining a loan from any moneylender.

Never Give the Lender Your ID/Licenses

She adds that it is illegal for a lender to collect or retain a borrower’s national identity, including driver’s licenses and even ATM cards.

Avoid Borrowing Money from Non-Licensed Money Lenders

According to Namugga, Ugandans who choose unlicensed money lenders with whom they have a private agreement, the authority has no control and give the authority its greatest challenge.

She adds that a campaign to raise awareness of the legal and criminal aspects of money lending has now been launched in Uganda.

What Moneylenders Have to Say

Moneylenders have been consulted by the regulating agency on how to operate legally without breaking the law.

Since there were fewer than 1,000 licensed money lenders in the entire nation as of March 2022, Namugga claimed that the majority of “money lenders” were working illegally.

However, some of the lenders of capital voiced worry about the manner UMRA is carrying out its responsibilities, where it is purposefully marginalizing and favouring borrowers. Additionally, Money Lenders questioned the authority’s capacity to carry out its legal obligations.

Money lender Flavia Nyakato claims that the rules are unfair since they support borrowers. She also claims that due to the nature of their business, they prefer collateral which has a strong bond to the borrower, but the rules prevent them from doing so, yet legal procedures are lengthy.

According to Mahad Zawadi, UMRA has developed a mechanism to enforce the law against non-compliant money lenders with whom they (licensed firms) compete in the market. These non-compliant lenders are ruining the reputation of the business due to their dishonest business practices.

“I am wondering why UMRA has failed to get rid of those crooks who are destroying the name of our business yet the law is very clear,” he said.

Because land titles and automobiles are easily transferred, according to a second lender who asked to remain anonymous for fear of losing business, they are good collateral for loans. He claims that loan has substantial returns, forcing them to increase their rate from 15% to 30% for a time limit of little more than a month.

He continues by saying that some lenders conceal payment deadlines from borrowers to seize their property on the pretext that they are in default.

Lenders of money acquire their clientele by word of mouth rather than advertising.

Juma Walusimbi, a spokesman for the Bank of Uganda, admitted that the bank had received several complaints but was powerless to take any action because it does not oversee money lenders.

According to Walusimbi, people shouldn’t borrow money unless they have enough savings to cover the cost of their property.

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