MASERU — Three money lending companies being sued for overcharging on interest say they are entitled to charge extra fees over the stipulated 25 percent interest on loans they offer to their clients.
This was said during High Court proceedings yesterday in a case in which over 100 civil servants are suing Select Management Services, Afrisure (EEZY Management Services) and B-Blue financial services for unlawful terms and conditions contained in the companies’ loan contracts.
The civil servants are complaining that the three companies are charging excessive interest rates as opposed to the 25 percent interest allowed by the Money Lenders Act.
But yesterday a lawyer representing Afrisure Advocate Motiea Teele told the court that the money lenders are entitled to charge extra money on top of the 25 percent interest.
“Our submission is that we are entitled to charge extra fees over the 25 percent interest rate,” Teele said.
“These extra charges are administrative fees which do not form part of the interest. They are only meant to cover expenses incurred by the lenders. They are service fees.”
“It would be unlawful only if we charge negotiation fees, which I submit we are not charging,” Teele said.
The civil servants had argued that the said companies are charging excessive fees which by effect make them pay up to 62 percent interest.
But Teele said the civil servants should prove in court that the charges were indeed excessive.
“They have to bring evidence in court that the charges are indeed excessive.
“Their case is that interest and administrative charges are one thing and we say no. We are still operating within the law because we are complying with the stipulated 25 percent interest.
“There must be distinction between interest and the administrative charges,” Teele said.
The civil servants are also complaining that they are not issued with receipts after paying their monthly instalments.
They say the law requires that they should be issued with receipts by the money lenders as proof of payment.
They pay their debts through the stop order system. Monthly instalments are deducted from their salaries by the treasury department to settle what they owe.
Teele told the court that the reflection of deductions in the civil servants’ pay slips have the same effect as the receipts according to his understanding of the definition of a receipt.
“The effect of a receipt is to acknowledge payment.
“The deductions reflected in their pay slips serve as acknowledgement of payment.
“Therefore issuance of receipts cannot be raised in the circumstances,” Teele said.
Civil servants also demand that the court nullifies the contracts they (civil servants) entered with the three money lending institutions.
They say the contracts are unlawful.
Teele said the contracts are legally binding.
He said the civil servants signed the contracts because they were aware of the contents.
Judgment on the matter will be delivered on October 12.