After the 2008 economic crisis that affected most of the world, Belize saw a proliferation if not multiplication of quick loans, payday loans and pawn shop facilities. These operations cater to individuals that cannot organise their financial affairs, and also on low income families living from payday to payday.
The money lenders legislation in Belize is so woefully antiquated that is has in the words of one local attorney-at-law, “….loopholes big enough to drive a semi through”. Image Above: Customers line up to borrow money, pay back loans or cash paychecks at moneylenders in the City of Belmopan.
In Belize’s modern history from the time it was a colony, loan sharks have existed on the fringes of the law. But from 2008 forward, Belizean deportees from the U.S.A. and later, local businesses, began to operate storefront quick loans, payday loans and pawn shops that focused on titled land property, motor vehicles and jewelry as collateral.
Tangential to this new business, a new model has arisen with stores that offer in-house credit on the purchase of household items such as beds, TV sets, washing machines, furniture, prescription eyeglasses and contacts, electronic gadgets, computers and cell phones. Some of these stores are Indian owned shops that offer discreet credit on the side. Others are big box stores that run adverts on television promoting “one dollar down” and also offer seasonal cash advances. All of these outlets have a money lender’s license that allows them to charge interest rates higher than commercial bank lending rates.
Stories of humble people losing their homes and farms to pawn shops came to a head when an irate victim took a pawn shop to court – and won. “The pawn shop loaned $3,500.00 BZ Dollars at 120% per year and took the borrowers land certificate as security, and when the Claimants could not pay the loan, the pawn shop owners Laura and Julio Blanco of Orange Walk decided to keep the property for themselves and transferred the 30 Acre property valued at more that $35,000. into the name of the pawnshop. Now, the judge has ordered them to return it. The Judge in this case was Madam Justice Sonia Young. The winning lawyers representing the claimants were Estevan Perrera and Kevin Arthurs. The loosing lawyer representing the pawn shop was Magali Young Marin. The landmark judgement also makes it so that persons in Belize who are victims of such loans can challenge it in court if the loan was received and their security illegally confiscated within the past 6 years”.
Our advice is to stay within your means. Alternatively, join a credit union or bank for financing. The process may be a bit longer, but the interest rates are way better than the crippling if not unethical methods deployed by moneylenders.
The Belize Money Lenders Act
Although very outdated, the above to referred act offers some protection to borrowers. But the law is so obfuscated in its current form, that it will take an attorney to challenge and win against lenders:
The sections that explicitly protect borrowers as at February 2017 are:
Section 13(1) – The pawn shop must provide the borrower with a copy of the loan agreement within 7 days of its creation. By contrast banks and credit unions must provide customers a copy of the loan agreement same day at its creation,
Section 13(3) – The loan agreement must include all the terms of the contract including the date the loan is made, the amount of the principal of the loan, and the effective annual rate of the interest charged on the loan.
Section 14 – The lender cannot charge compound interest or increase interest rates.
Section 15 – The lender cannot charge for reviewing or negotiating the loan.
Section 16(2) – The lender shall provide the borrower with copies of the loan documents at all times.
Section 17 – The lender shall not engage in advertising that is misleading to the public. Examples of misleading the public are suggesting a relation to the Financial Secretary, a ministry or department of the Government, or Central Bank of Belize; and / or promoting misleading interest rates or transaction fees.
Section 19 – The lender must have the annual interest rate and all other charges and fees that are levied on loans, prominently displayed in the pawn shop or money lending institution including stores selling furniture and other household or motor vehicle items on credit under this Act. Shadycredit providers display their license and fees at the remotest ends of their retail outlet making this unreadable by anyone without a set of binoculars.
Section 23 – The lender cannot bring a claim against a borrower after 12 months after the action happened.
Section 24 – If a borrower goes to court with sufficient evidence that any interest charges in respect to the amount borrowed are extensive, onerous or the transaction is harsh and / or unconscionable, the court may relieve the borrower from any excess payments requested from the lender.
Advice On How To Protect Yourself When Borrowing Money
1. Get a contract in writing from the lender addressing loans from banks, credit unions, store finance and pawn shops.
2. That contract must state terms of loan : the date, amount of principal, and the effective annual rate of interest being charged.
3. Understand what you are being asked to sign.
4. Sign before depositing security or taking money.
5. Keep a copy of that contract.
6. No contract or security can be enforced by any lender if it is proved that the contract was not signed by the borrower before the money was lent or before the security was given.
Protection for lenders under the Belize Moneylenders Act:
Section 14 of the Moneylenders Act, Chapter 260 of the Laws of Belize states as follows:
“(I) No contract for the repayment by a borrower of money lent to him or to any agent on his behalf by a moneylender after the commencement of this Act or for the payment by him of interest on money so lent, and no security given by the borrower or by any such agent as aforesaid in respect of any such contract shall be enforceable, unless a note or memorandum in writing of the contract be made and signed personally by the borrower, and unless a copy thereof be delivered or sent to the borrower within seven days of the making of the contract.
(2) No such contract or security shall be enforceable if it is proved that the note or memorandum aforesaid was not signed by the borrower before the money was lent or before the security was given, as the case may be.
(3) The note or memorandum aforesaid shall contain all the terms of the contract, and in particular shall show the date on which the loan is made, the amount of the principal of the loan, and the effective annual rate of interest charged on the loan. “
Section 26 (1) – The lender cannot charge more than 4% monthly or 48% annually. To put this in perspective: 48% annual interest rate is par for the course for lenders under this act, and far more that what banks and credit unions offer.