Social media has been buzzing with a picture of a writing on the walls of an alleged loan defaulter. The writings also allege that QUICK CREDIT, a popular loans company, is the person behind the writings. Let me say here that I have not done any independent check to confirm if Quick Credit is behind the writings on the walls of the person and this article is not in any way intended to take-on the said company but rather provide general advice to the public at large. This “quick credit” defaulter and other issues concerning how companies treat customers who default in paying loans has inspired my decision to take up this topic and share a few tips to both individuals and companies alike.
This Article will throw some light on the rights of a defaulter as well as the right of the creditor and what the two parties can safely do to ensure they do not fall at the wrong side of the law.
To set the tone, let me share the story of a client whose name I cannot mention. This client took a loan of GHC 15,000 (Fifteen thousand Ghana Cedis) from a loans company (name withheld). Under the terms of the agreement, she was supposed to pay GHC 1,500 per week for 13 weeks in order to fully repay her loan to this company.
It's instructive to note that the repayment amount would be GHC 19,500 over the 3-month period. That means an amount of GHC 4,500 would be paid as interest for the 3-month period and this represents 10% interest per month. It also means 30% interest for the three months and 120% interest Per Annum.
I am not in any way against this interest rate. But my interactions with many clients show that they lack the ability to do simple mathematical calculations and so they end up taking very expensive loans which they are not able to pay in the end.
So back to my anonymous client, she paid her GHC 1,500 per week for 8 weeks and was unable to pay in the next two weeks after the 8th week. According to her, the market was bad for those two weeks and she would have been able to pay by the next week if this company did not interfere.
The loans company came to lock her shop with their own padlock. (without any court order) She pleaded with them severally to open it up for her but they refused. According to her, it is the shop which will help her to repay and so if they have locked up the shop, then they are denying her an opportunity to sell to repay them.
The shop remained locked for over 6 months. It had to take a Judge to order them to go and open it back for her.
Meanwhile, they continued to pursue her into her home for the loan. They broke her glass windows, broke her doors and threw stones onto her rooftop all in an attempt to check if she was in the house.
One day, they found her and put her in their car and sent her to the police station. She was so scared. Upon narrating her story to the police, the commander told her she has not committed any offence and advised her to sue this company. She therefore took them to court before they opened her shop for her. By the time the shop was opened, all the perishable goods in her shop had gone bad. Another person had taken advantage of her absence to open a shop just near her shop selling the same things she was selling before her shop was locked up.
She has lost use of the rent she had paid for 6 months and also lost her customers to another person. She is in court demanding for all of this from this loan company.
Now let’s look at these stories too. Each week, I get calls from at least 1 person who complains that they took a loan of about GHC 100 from an online loans app. They are normally supposed to repay within 3 days and sometimes 7 days and with an interest of about 80% within that short period of time. They default and the company behind the app will share their pictures on social media with words such as “CRIMINAL”, “WANTED’, “THIEF” etc in order to get them to pay the loan.
This is something that I believe the Cyber Security Unit of the Ghana Police Service must take up. It appears to me that in the process of agreeing to the loan agreements, the app also request for permission to have access to your pictures and contacts and so when you default in paying the loan, the owners of the App go into the profiles of these customers, pick up their pictures and add inscriptions like THIEF, WANTED, CRIMINAL etc and send these pictures to all the contacts on their phones. This embarrasses you and forces you to pay the loan to avoid further embarrassment.
Now these two scenarios mean that people are desperate for money and so they enter into agreements as what the law would call the “necessitous person”. They fail to observe all the dangers associated with the loans they intend to take and get into bizarre situations after taking the loan.
In my second scenario, it also appears that all the apps have not been licensed by the bank of Ghana to give loans and some of them do not even have offices in Ghana at all, thus making it difficult to sue them. (That is if those persons can even afford litigation)
This article is not meant to encourage people to take loans and refuse to pay. It is very wrong to take a loan and refuse to pay. However, situations can always lead to a persons inability to pay for a loan properly contracted and in such situations, both the lender and the borrower have some rights and responsibilities.
The borrowers and Lenders Act of 2020 (ACT 1052) regulates Borrowing and Lending in Ghana under the supervision of the Bank of Ghana. It will be very difficult to make reference to all the appropriate sections and still make this article reader friendly and so I will largely discuss broad principles instead of making precise references. It's also important to add that some important principles of contracts for loans can be found in several case laws and not necessarily the Act.
Generally, the courts will enforce any contract between two persons with capacity irrespective of whether the terms of the contract are fair or unfair. The only thing the court is interested in is “whether at the time of making the contract, the two of them met the legal criterion for making a contract”.
Some of the principles are as follows:
a. there was an offer by one party to the other and there was an acceptance.
b. The offer related to something which the acceptance also related to. For example, the loans company offered GHC 10,000 as loan and the customer also accepted GHC 10,000 as loan. If the Lender offered GHC 19,000 but the borrower accepted GHC 17,000 then there is no contract because the subject matter is different for the two parties.
c. What is the capacity of the parties? Are they all 18 and above? Or is the company duly registered and even licensed to operate in Ghana?
d. Was there an intention to create legal relations at the time the offer was being made? For example, if a married man whilst on the bed with his “slay queen”, offers to take that “slay queen” to Canada, would you consider it as a serious offer with the intention to create legal relations and for which reason the “slay queen” can sue to enforce.
e. Consideration. There must be consideration for the contract to be made. So as the lender is giving his money to the borrower, the consideration is the extra money he shall get back in terms of interest and that is what makes the contract valid.
In effect, if you can read and write, and you have sound mind, and you take a loan of GHC 1,000 for 1 month and agree to pay 900% for the 1 month, the court will enforce the contract against you if you fail to pay. You will not be heard to say the interest is too high.
RIGHTS OF LOANS COMPANIES
1. Right to recover loan amount – The lender has the right to recover any amount it has given to a debtor. Remember that is their capital and without getting that money back, they shall collapse.
2. Right to recover agreed interest – In addition to the principal, there is always an agreed interest. The company has the right to recover this interest as well. The Interest is the reason why the company agreed to give its money as loan and is therefore entitled to get this interest back as profit.
3. Right to report defaulter to credit reference bureau. There are a number of credit reference registers in Ghana currently. These registers help banks and lenders to know if a person has the habit of taking loans and not paying before giving them loans. When you default in paying your loan, the company has the right to send your information to the CRB so they flag you as a bad customer in order to avoid the situation where other companies may give you more loans only for you not to pay. So you would find in all the loan agreements that there is a clause that says you agree for your information to be given to a credit reference bureau.
4. Right to take over a secured security under the loan agreement. Some loans are secured by a property. Previously, you needed a court order as a lender before taking over a security. But currently, under the provisions of the Borrowers and Lenders Act, the lender can register the security with the Collateral Registry of the Bank of Ghana. This allows them to go through a short procedure to take over the security when you fail to pay the loan. This does not apply to all kinds of properties and when you consult a qualified lawyer, they will be able to help you identify which type of property can be taken without court order and which ones cannot.
5. Right to sue defaulter – a loans company has the right to sue any person who has taken loan defaulted in paying the loans.
6. Right to Execute judgment upon success – upon success at the court, the next step is for the loans company to come and execute the judgment. Execution can involve attaching your Bank account (Garnishee), attaching your property (Fife) etc.
RIGHTS OF THE DEFAULTER
1. Right to peaceful existence during the period of the loan. A borrower should not be subject to constant scrutiny and interference during the period the loan he has taken from the lender. A constant scrutiny and interference can affect how the borrower can work and therefore his ability to repay the loan is also affected.
2. Right to work during the time of the loan – even when the borrower has used his/her shop as security for a loan, the lender has no right to just walk in and lock it up without any notice to the borrower. And where the said shop or workplace is not a security, the lender has no right or power to go there to lock it up for any reason.
3. Owing is not a Crime – the Police has no role in debt collection under our laws in Ghana. Owing money is also not a crime and the police cannot be brought in to arrest a debtor for any reason. If a borrower is failing to pay, the lender can only demand for the money and if he or she fails, use the court system to get the money.
4. RIGHT TO CONFIDENTIALITY - Section 56 prohibits a lender from disclosing information obtained from the borrower to any other third party unless with due process of law. Due process of law may include a court order, an agreement between the lender and the borrower, or where there is default in payment then the procedure under section 60 clause 3 can be applied. That procedure is that the lender must send a written letter to the borrower to come and pay. If the borrower refuses to accept the demand notice (Demand letter) on three consecutive occasions, then the law says, the lender can publish the Demand Notice in any newspaper. Clearly, writing on the customers walls or publishing his pictures with words like CRIMINAL, THIEF AND WANTED are not part of what the law says and it is my submission, that the customers of such lenders can either report them to the bank of Ghana or sue them or do both.
GENERAL ADVISE TO BORROWERS
1. Do not run into hiding when you default on your loan. The Lender can go through due process of law to find you out and sell your properties.
2. Do not avoid picking their phone calls when you have defaulted. It shows you have no respect for the terms of the contract.
3. In fact, when you know you cannot pay on schedule, you should rather call the lender and ask for time instead of allowing them to come and look for you. Allowing you more time will at worst give you more interest to pay and its better than hiding.
4. Don’t be intimidated by any policeman. They are not debt collectors. Report them to their superiors when they arrest you over non- payment of loans.
5. A lender has no power to lock up your shop, office or home because you have not paid the loan. When they attempt to do so, you have the right to use reasonable force to resist them. If they lock your shop, you have the right to break the lock and throw it away or call in the Police to assist you.
6. Don’t allow any loan officer to destroy your property because you are owing. They cannot write on your walls, break your window or doors. They have to pay for this if they do.
CONCLUSION
Owing money is not a crime in Ghana. No Loans company can cause your arrest, or arrest you by itself if you have not paid a loan they have given you. They have the right to come for their money, but that does not give them the power to unduly defame you, harass you, seize your property, or destroy your property.
Be sure to deal with registered and licensed companies. All licensed companies can be seen on the Bank of Ghana Website. Don’t deal with any App or Company whose name is not there.
You may kindly follow this blog or any of my social media handles as published on this blog. Your comments, suggestions, criticisms are all welcome under the comment section here. Thank you.
You can see the full list of Lenders Licensed by the Bank of Ghana in this link: https://www.bog.gov.gh/supervision-regulation/all-institutions/
Written by
Richard Nii Amarh ESQ.
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