No legal framework for debt-management firms

Namibia does not have a clear framework on the regulation of debt-recovery companies, despite many citizens falling prey to unregistered firms in this space.

This week, the Namibia Financial Supervisory Authority (Namfisa), which regulates the non-banking financial services sector, and the Bank of Namibia, which monitors the banking sector, confirmed the loophole in the regulation of these firms.

While Namfisa said it is working on incorporating the operations of such institutions in the country’s financial services laws, the central bank said it has no mandate to deal with debt-recovery firms.

“We don’t currently have a regulation for debt-recovery firms, however, with the current credit consumer bill, proposed regulations have been set out,” said Victoria Raimond of Namfisa.

Martha Thomas* borrowed N$2 500 from a micro-lender she knew.

The money was to bail out her brother, who had been arrested at the time, and because she only earns N$2 400 monthly she could not afford it.

However, after months of not being able to repay the loan, Thomas was handed over to a debt-recovery company.

“The debt-recovery company never contacted me, they just showed up at work. It was a lady and she just came with a document for me to sign. The document did not even have a letterhead, so I refused to sign,” she says.

Thomas says she received an amortisation report from the debt-recovery company and was shocked to see the amount she had to repay.

“According to what the report said I would have to pay back a total of N$19 192, and I would only be done paying back the money in 2030.”

Thomas says this situation is a reality of many other people in Namibia, and urges legal intervention.

“I want Namfisa to start regulating these companies, because now there is no place to even enquire if this is legal or not,” she says.

According to Nangula Liberty*, an employee at a local debt-collecting firm, the court governs all debt-recovery firms, and also sets the limit of how much interest they are allowed to charge.

“The court sets the interest rate. Currently the limit of interest that can be charged across, the sector is 20% per annum,” she says.

Liberty says she has never come across a company that charges more than that.

“The client has to pay a 10% collection commission, and the legal and admin costs. These costs can vary depending on whether the person who owes the money goes to court or not. The admin fees could increase if the person goes to court,” she says.

Liberty says many default on payments.

*Names have been changed for fear of victimisation.