07 Apr Who is monitoring finance companies and moneylenders? – Nobody.
I went to Tafaigata Prison last week. My first time. I was only there for an hour and a half. But I was apprehensive, especially as I thought about all the times we hear about prisoners escaping, robbing houses and some attacking people.
However, in the course of my meeting with the Assistant Commissioner, I learned something about people who are sent to Tafaigata. Not all of them are criminals convicted of any crime. Rather, they are civil prisoners. Men and women who have been sent to prison for a short period of time – one week to six weeks – because they have fallen behind in their debt repayments to a creditor.
These civil prisoners stay in the same cells as convicted criminals. They work alongside them, eat the same food, follow the same schedule, and in all respects, are treated exactly the same as those who have been sent to Tafaigata for robbery, assault, drugs, rape etc.
Let’s be clear. These civil prisoners are not in Tafaigata because they defaulted on their half a million tala mortgage with the bank. Or because they couldn’t finish paying off an acre of land somewhere. They didn’t borrow $100,000 from NPF to set up a business, and then refuse to pay it back. They didn’t misappropriate funds from State-Owned enterprises and be found negligent by Cabinet Finance Review Committees. No.
They’re in prison because their creditor – either a small time village moneylender OR an “instant” finance company – gave them a small loan. In Tafiau’s case, the woman from Letogo, it was $200. In another woman’s case, ‘Sina’ from Malie, it was $330. The Asst Commissioner mentioned a man who was in Tafaigata for $700.
Did these borrowers run off and not pay their creditor? No. In most cases, they made regular weekly payments, over a period of 1…2…3 years. When they missed a few weeks here and there, they were hit with penalties, and interest upon interest. It quickly became impossible for them to ever catch up.
Indeed, it begs the question, was there a due diligence assessment done by the lenders to ensure that they were ever able to meet the instalments? Or were they set up for failure to begin with?
These moneylenders and finance companies specialise in lending money to people who often can’t get a loan anywhere else. Because they’re too poor. Or they don’t have a regular source of income. After all, only approx 30,000 Samoans have formal employment, according to the National Provident Fund’s latest reports. Maybe they’re only paid in cash. Or they may have nothing to offer as collateral or security that a bank would accept. Maybe all their friends are already signed up as guarantors for other people’s loans….
But the need is there. Especially at certain times of the year. White Sunday is a big moneylending season. So is the start of the school year. One finance company’s website puts it, ‘Do you need help in paying school fees? Church commitments? Do you need help for family faalavelave?’
As Su’a Hellene Wallwork, President of the Law Society points out, “The instant finance companies do provide a much needed service for our people. They make it easier to get a loan for those members of our communities that cannot get loans from the main financial institutions.”
Those main financial institutions are answerable to a ‘higher power’. The Central Bank of Samoa (CBS).
But who is monitoring the finance companies and village-based moneylenders? The short answer is – nobody.
It’s why a moneylender like the one that Tafiau borrowed from, was able to charge her 20% interest a week. Her sister-in-law explained, “E kala i le lima kala le kului. A aikalafu lau kupe e 200 kala, e kokogi le 240 i le vaiaso lega. A misi loa, oga kului lea o le 80 kala i leisi vaiaso.”
According to the sister-in-law, Tafiau was never issued any receipts for her weekly payments. The moneylenders took Tafiau’s name to court for an eventual sum of $1091, some two years after she first borrowed $200.
We don’t know if Tafiau ever actually appeared before a judge, or if she ever saw the inside of a court.
Just the inside of Tafaigata Prison.
Su’a said, “As it is, a judgment debtor can end up in prison without ever having seen a Judge or the inside of a courtroom. Unfortunately, many debtors do not turn up to Court (for various reasons) when their cases are called so they are totally unaware of the procedure.”
There are so many people being taken to Tafaigata Prison on Warrants of Committal for judgement debts that there is an entire police unit dedicated to carrying out this work. It’s almost like creditors have their very own ‘debt collector muscle’.
While there may be lenders who are treating their customers with fairness, there’s also others who are preying on poor and ‘financially illiterate’ people who don’t understand how finance contracts work, and who don’t know the difference between simple and compounding rates of interest.
They don’t know that they are purchasing a product (that is a loan) and the ‘cost’ of the product is the rate of interest charged. They are being sold loans without being clear how much these loans are costing them. It is a vicious cycle because the very fact that they’re poor means that they aint got no time to be asking questions of costs etc., they’re just so desperate for the loan.
As Su’a said, “I believe we need to put more systems in place to ensure more financial awareness on the borrower, and more obligations on the lender to properly explain the loan terms and to check/ensure that the borrower can meet the repayments.”
We can point our fingers and righteously tell people they need to ‘live within their means’ and ‘don’t borrow money if you can’t pay it back!’ We can criticise churches and the financial burden that sometimes comes with being a faithful member. We can theorise about fa’alavelave’s and how and why we are our own worst enemy when it comes to saving face and contributing to a distant cousin’s funeral when at home, our kids have nothing to eat.
In the meantime, there are men, women (and babies), sitting in Tafaigata alongside violent offending criminals.
All because they couldn’t keep up with their payments on a small loan that often, has been compounded into a ridiculous amount. Does that sound right to you?
After my one brief visit to Tafaigata, I say no. It isn’t right.
The Financial Institutions Act allows for the Central Bank to “extend its prudential supervision to non-bank persons or institutions.” Like finance companies. But it hasn’t yet. Isn’t it time that it does? Can somebody somewhere please make some attempt to monitor these moneylenders?
Finally, Samoa ratified the United Nations International Covenant on Civil and Political Rights in 2008. According to Article 11, “No one shall be imprisoned merely on the ground of inability to fulfil a contractual obligation.” Why are we not living up to this?
Isn’t it time the Samoa Law Reform Commission looked into our archaic ‘debtor’s prison’ laws? Where’s the National Human Rights Institution on this issue?
Just a few questions. From my first visit to prison.