This week we examine some of the mechanisms that lenders use to keep track of the people who borrow from them and the risks that consumers run as a result.
Micro Lenders Association of Botswana
The Micro Lenders Association of Botswana was founded in 1998 to promote the interests of small-scale lenders and to make sure that there was at least some control over their business practices.
Some of the rules that govern members of the Association are perfectly respectable. For instance they must trade from proper business premises unlike some of the loan sharks we found who operate from car parks or their offices in government!
Members of the Association are forbidden from charging more than 30 percent interest per month. Yes, you read that correctly. Mmegi haven't made a printing error. 30 percent per month! Compare that with the banks, none of whom charge more than 2.5 percent per month at the moment.
Also, they must all use Compuscan, a central database of loans that operates out of South Africa. They're meant to check all potential borrowers with Compuscan to make sure that they don't already have an outstanding loan from another lender.
Finally they must all adhere to the Association's Code of Conduct, which should be displayed openly in their premises.
This strikes Consumer Watchdog as quite respectable. Well, except for allowing them to charge 30 percent interest per month, which we think is just outrageous!
So what's the problem?
How effectively are these regulations enforced? How does the Association make absolutely sure that every potential customer is checked on Compuscan? How can anyone be sure that the data held in Compuscan is correct? Surely an unscrupulous lender can just "forget" to register a doubtful borrower in the system and make the loan anyway? There's no way it could be traced.
We are told by the association that they've been in discussion with government about proposed legislation to regulate the lending industry. We agree completely that there needs to be effective regulation. However, we are concerned about who would actually DO the enforcement. The Romans asked: "Sed quis custodiet ipsos custodes?" "Who watches the watchmen?"
Are we going to see another self-regulated industry like the banks? The Banking Adjudicator does some great work but he does so with the permission of the banks, who appointed him, who pay him and who can fire him if he irritates them too much!
Let us be clear about the Micro Lenders Association of Botswana. It's great that they exist and we wish them luck. Consumer Watchdog welcomes any industry that tries to clean up it's own act. However micro lenders must NOT be allowed to regulate themselves. We need a body with real teeth to do this. It should be government or perhaps the Bank of Botswana who control the lenders, who can force them to play by the rules and who, if necessary and after due process, can shut them down, take away the keys to their offices and with the real crooks, throw them in jail!
TransUnion ITC are the largest credit reference agency in Botswana, although they operate from South Africa. They keep details on over 400,000 customers in Botswana and companies can contact them to check on our credit history and status.
In late May this year they placed full page advertisements in the press explaining who they were and inviting us, the customers, to contact them to check our own details. Excellent! Exactly what Consumer Watchdog wanted to see.
One of our mystery shoppers called ITC and asked how secure the process was and how they verify the identity of the caller before disclosing confidential data. They said that they ask each caller for their Omang or passport number, date of birth, postal address and name of employer before disclosing anything.
So our mystery shopper called back and using her own, very feminine voice, gave her husbands ID number. Instantly ITC told her the other details that she should have given them and then her husband's complete financial profile including where he banked, his current credit rating and every credit application he had made. Luckily for our caller (and her husband), she didn't discover anything she didn't already know, or that threatened their marriage!
We spoke to ITC afterwards and were told the usual story. Botswana is a "developing market" and that we shouldn't expect everything to work smoothly all the time etc etc etc.
This simply isn't good enough. Firstly there's the horrendous breach of security. It really is very easy to call up and pretend to be someone else. Secondly how do we ensure that the data held on us is correct and how can we force companies to correct it when it is shown to be wrong?
The bad news is that we have no legal protection against this sort of thing in Botswana. We need Data Protection laws that will force companies who hold data on us to guarantee that it is correct and to be forced to correct it when it's not.
Incidentally, if anyone from government is reading this and wants to take a look at the Data Protection laws from other countries for inspiration, go to our website, click on Consumer Watchdog, then on Useful Links.
And now for some good news.
Consumer Watchdog believes that as well as complaining, we should all celebrate success when we find it. This week we want to celebrate:
l The team at Nandos in Broadhurst for always being so friendly
l Lalala at Stanbic Bank Fairgrounds Branch for excellent customer service
l Refilwe at FNB Industrial Branch in Gaborone who is "just amazing"!
Please tell us who YOU think deserves to be celebrated. We know there are people out there who are doing a great job and we want to hear about them and to recognise their achievements.
You can contact Consumer Watchdog by emailing us at firstname.lastname@example.org or by post at Consumer Watchdog, c/o Mmegi, P/Bag BR 50, Gaborone. You can also visit our website at www.bes.bw and then click on the link to Consumer Watchdog. We really want to hear from you!