Header Ad

Sri Lanka leasing firms say three-wheeler chief’s killing linked to unauthorized lender

ECONOMYNEXT – An association representing Sri Lanka’s registered leasing and finance companies said a recent killing of a head of three wheeler association chief was not linked to any of their 41 members and blamed an unauthorized money lending company.

Chairman of Self-Employed Professionals’ Three-Wheeler Association, Sunil Jayawardena was allegedly beaten to death following an argument when he went to intervene at a company where a member of his association had borrowed money and had defaulted.

The Finance Houses Association said the incident did not relate to any of its 41 member firms and named a company which it said had been carrying on an illegal money lending business.

The FHA said it was originally set up to lobby against “emerging problems in an unregulated environment that the deposit taking and lending companies” and “fraudulent and unethical practices adopted by certain institutions that ‘claimed’ to be Finance Institutions. ”

In Sri Lanka deposit taking and lending is a business regulated by the Central Bank and ‘loan’ or ‘leasing’ contracts’ of money lender are not legally enforceable, industry analysts say.

Unauthorised money lending companies will also give short term loans against vehicle registration books of a vehicle and an undated cheque, and strong arm tactics are used to recover money when borrowers default.

A ‘bounced’ cheque however has some legal standing.

People may go to such firms because they have a defaulted on the credit information bureau or otherwise cannot access a bank or leasing company.

The FHA said it had complied with a central bank or Circular No. 04 and 05 of 2020 issued by the Central Bank of Sri Lanka giving credit relief.

“While complying to debt moratorium regulations the licensed finance companies have offered debt relief to approximately 500,000 customers across Sri Lanka,” the FHA said.

“Under such context, FHA reiterates its condemnation of the perturbing actions by the said unregulated and unlicensed lending organization, which has resulted in a loss of an invaluable human life.”

A leased asset is technically owned by the leasing company and is transferred at the end of the lease period at a nominal sum like one rupee to the lessor.

The ability to easily re-possess a leased asset allows persons without family wealth or an established credit record or any other assets that can be offered as collateral to get a vehicle or other assets for a business.

Leasing companies typically cater to riskier customers who are not entertained by banks.

While the FHA said those who asked for the moratorium had been given, there have been complaints that credit reliefs asked from banks and finance companies have not been fully granted to those who asked for, especially for new credit.

The government had not given a guarantee for the new relief credit, but the central bank had lowered some capital rules, which give banks some leeway but not credit protection. (Colombo/June13/2020)