Illegal lenders: How they cheat poor people

Illegal lenders: How they cheat poor people

Men on motorcycles wearing black helmets beat up & terrorise late borrowers. Keep paying back your loan forever, is what some loan terms do to you.


Photo above of a walkway outside Nava Nakorn Industrial Estate littered with advertisements for loan sharks. Many workers faced financial difficulties after last year's floods (Photo: Apichit Jinakul) 

Photo below of Police Colonel Thittawat Suriyachai with evidence of predatory lending networks.

Click button to listen to Loan Shark Methods to download


CRIME TRACK

Police target predatory lenders

CIB unit aims to stamp out loan sharks and will take on corrupt cops who turn a blind eye
23/07/2012
Wassayos Ngamkham

The Central Investigation Bureau (CIB) is working to topple predatory lending cartels nationwide...

...But the ambitious task is being made more daunting, ironically, by the law and police themselves... penalties for illegal lending offenders are light, while some local police have sought bribes to look the other way...

...The unit believes about 40-50 major networks of predatory lenders are operating nationwide

Of these, two have the resources and backing to counter the authorities and keep their illegal businesses open. One network is based in Uthai Thani and the other in Chanthaburi.

Pol Col Thittawat said research into the syndicates uncovered two general lending methods. The first method imposes a 24-day repayment period and the second is the so-called "2%-interest" scheme, which virtually chains borrowers to slave-like repayment terms.

The 24-day lending scheme requires borrowers to repay an equal amount every day for the entire period.

The lender determines the daily rate of repayment so the entire principal of the loan is paid off in the first 10 days. The two weeks of repayments which remain are for paying interest alone, which can vary from lender to lender, but averages about 50%. 

The legal limit on interest charged is 28% for registered non-bank lenders. 

In the "2%-interest" method, the customers pay down only the interest portion, charged at 2% per month.

The repayment amount may be a lot smaller than that in the 24-day method but borrowers are exclusively paying down the interest, not the principal. Borrowers will carry on making the payments forever unless they come up with a lump sum to pay off the entire loan.

Most borrowers are low-income villagers or vendors upcountry, Pol Col Thittawat said. Many turn to loan sharks after financial institutions reject them because they have no steady sources of income or assets to use as collateral.

"They have no choice but to accept the loan conditions [from the illegal lenders] knowing full well the interest is way above the legal ceiling," he said.

In most cases, the loan is spent on motorcycles, gold jewellery or mobile phones, he said. Some use the loans to raise funds for gambling. On average, customers borrow 3,000-50,000 baht.

Lenders are aware of the high default risk and work to increase customer volumes, Pol Col Thittawat said.

The lenders also employ "black helmet" debt collectors who can be ruthless to customers who are repeatedly late on their repayments.

The collectors typically drive motorcycles and wear black helmets when they pay their customers a visit. They can terrorise the customers into making a prompt payment and may resort to physical assault, Pol Col Thittawat said.

"The collectors usually get a cut of 20% of the debt they chase after, on top of the 8,000-9,000 baht a month of salary which the lenders pay them," he said.

Recently, police have raided more than 20 predatory loan offices in major provinces such as Nakhon Ratchasima, Khon Kaen, Chon Buri and Phitsanulok, and arrested between 60 to 70 suspects.

Each lending network has at least 35 million baht in circulation per month.

Police said it is hard to nab the masterminds as they work through proxies.

The law provides for a maximum fine of 50,000 baht and a jail term of up to three years. Many offenders return to the trade after serving their prison terms.

"Pol Col Thittawat said some police take bribes to turn a blind eye. "We're broadening our investigation and going after our own people as well," he said.
 
Contact Crime Track: crimetrack@bangkokpost.co.th

(Source: Bangkok Post, CRIME TRACK, Police target predatory lenders, CIB unit aims to stamp out loan sharks and will take on corrupt cops who turn a blind eye,  23/07/2012, Wassayos Ngamkham, link


Illegal Lending Vocabulary

lending - giving money to someone who agrees to pay it back in the future การให้ยืม

loan - an amount of money that a person, business, or country borrows, especially from a bank เงินกู้
loan sharks - illegal money lenders

littered -
lots of garbage in an area  (scattered, thrown about)
walkway littered with advertisements for loan sharks

cartel - a group of people or companies who work together to control the price of the goods they sell and avoid competition
lending cartels


predator (noun) - an animal that kills and eats other animals

predatory (adjective) -  1. treating people badly for your own benefit; 2. killing and eating other animals 

network - a large system of connected parts, organisations, people, etc. เครือข่าย
predatory lending networks

predatory lenders
predatory lending cartels

evidence -
something that shows that a crime was commmitted and who did it หลักฐาน

target - a goal; what you are planning to achieve เป้าหมาย
police target predatory lenders

cops - (slang) police
corrupt cops

take on - start some difficult task or job; start a difficult fight 
take on corrupt cops

blind - unable to see ตาบอด บอด
turn a blind eye - pretend you don't see something bad happening (such as someone breaking the law)

stamp out - end some activity quickly and violently

CIB unit aims to stamp out loan sharks and will take on corrupt cops who turn a blind eye

topple - to cause to fall; to force out of power คว่ำลงมา โค่นอำนาจ
nationwide - throughout a whole country ทั่วทั้งประเทศ

The Central Investigation Bureau (CIB) is working to topple predatory lending cartels nationwide...

task - a piece of work that someone does; something that you have to do หน้าที่; ภารกิจ

ambitious - goals that are very high and difficult to achieve (perhaps even too high to be achieved) ทะเยอทยาน
ambitious task

daunting - difficult to deal with or do
daunting task - very difficult thing that must be done

made more daunting
- made more difficult
ironically

penalties - punishments บทลงโทษ
light penalties - punishments that are not severe or strong

offender -
a person who broke the law

illegal - against the law ผิดกฎหมาย, นอกกฎหมาย
illegal lending
illegal lending offenders

local - in some small area of a city or country ท้องถิ่น
local police

bribes - money given to someone to get them to do a favour for you (usually illegal or against the rules)
bribes - money or a present given to someone so that they will help you doing something dishonest or illegal สินบน

look the other way

...But the ambitious task is being made more daunting, ironically, by the law and police themselves... penalties for illegal lending offenders are light, while some local police have sought bribes to look the other way...

resources - the materials, money, and other things needed for a person or organisation to function properly; things needed for proper functioning, to get a job done ทรัพยากรที่มีอยู่

backing - support, help การสนับสนุน

counter - to take action to oppose or stop something ต่อต้าน
authorities - government officials; the police or people in official organisations who have the legal power to make people obey laws or rules เจ้าหน้าที่ (ตำรวจ หรือผู้มีอำนาจ)

counter the authorities - work against the police and government (who are enforcing laws)

have the resources and backing to counter the authorities

based in - located in a place
network based in Uthai Thani

...The unit believes about 40-50 major networks of predatory lenders are operating nationwide. Of these, two have the resources and backing to counter the authorities and keep their illegal businesses open. One network is based in Uthai Thani and the other in Chanthaburi.

syndicate - a group of people or organizations working together to achieve shared goals

terms - details and conditions, requirements  in an agreement, contract, or arrangement ข้อกำหนด
repayment terms - the rules that a borrower must follow on paying back a loan

repayment period - the period of time that a loan is paid back to the lender

interest - payments made for the use of another's money for a period of time

scheme - 1. a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ; 2. a plan for achieving something, especially something illegal or dishonest แผนการ (ที่มีท่าว่าจะผิดกฎหมาย)
2% interest scheme

virtually - almost; almost all เกือบจะ แทบจะ

slave - ทาส, ผู้ทำงานหนักและได้ค่าแรงต่ำ
slave-like - the same as a "slave"  
slave-like repayment terms

chains X to Y - ties or attaches X to Y very strongly
chains borrowers to slave-like repayment terms

Pol Col Thittawat said research into the syndicates uncovered two general lending methods. The first method imposes a 24-day repayment period and the second is the so-called "2%-interest" scheme, which virtually chains borrowers to slave-like repayment terms.

lender - someone or something that lends (allows to be borrowed) money, especially a large financial organization such as a bank ผู้ให้ยืม,ผู้ให้กู้
daily rate of repayment

principal
- the amount borrowed that must be paid back
principal of the loan

vary -
differs, is different
vary from lender to lender

The 24-day lending scheme requires borrowers to repay an equal amount every day for the entire period. The lender determines the daily rate of repayment so the entire principal of the loan is paid off in the first 10 days. The two weeks of repayments which remain are for paying interest alone, which can vary from lender to lender, but averages about 50%. 

limit - a highest or lowest amount
legal limit - the highest amount allowed by law
legal limit on interest charged - the highest interest (fee for borrowing money) that can be charged by lender

registered - officially recorded as a business with the government (and given permission to operate) (
registered non-bank lenders

portion - a part of something ส่วน
the interest portion of loan payments

borrowers are exclusively paying down the interest, not the principal

come up with - 1. get something you need (come up wit the money needed to pay off the loan before the deadline); 2. create something new (example: come up with an idea)

sum - an amount of something, especially money จำนวนเงิน
a lump sum - pay one large amount of money at one time (not spread out over many smaller payments)

come up with a lump sum to pay off the entire loan

The legal limit on interest charged is 28% for registered non-bank lenders.  In the "2%-interest" method, the customers pay down only the interest portion, charged at 2% per month. The repayment amount may be a lot smaller than that in the 24-day method but borrowers are exclusively paying down the interest, not the principal. Borrowers will carry on making the payments forever unless they come up with a lump sum to pay off the entire loan.

income - money that people receive from work or some other source, used for household consumption and savings
low-income villagers

vendors - people who sell things usually from a small stall, cart, or store or in the market พ่อค้าแม่่ค้าหาบแร่แผงลอย
upcountry -
outside of Bangkok area

institutions - large and important organizations, such as universities or banks สถาบัน
financial institutions - banks and other companies that work like banks

reject - to not agree with a request, offer or proposal ปฏิเสธ ไม่ยอมรับ

turn to loan sharks after financial institutions reject them

source of income -
some business or activity that someone gets money from

steady - continuous without stopping
no steady
sources of income

assets - a thing of value that a person or a company owns, for example: stocks, bonds, real estate, loans to others, or money สินทรัพย์

collateral
- property or some other valuable asset that you promise to give to a lender if you cannot pay back money that you borrowed ทรัพย์สินผูกพันตนเพื่อเอาไว้หักชำระหนี้หากไม่ชำระหนี้นั้น  (See glossary)

have no choice - must do; need to do

ceiling - an upper limit เพดาน ขีดจำกัด
legal ceiling - the highest amount that is legal
above the legal ceiling

funds - money to be used for special purposes เงินทุน
raise funds - get money for some business, project or activity

gambling - the activity of betting money, for example in a game or on a horse race การพนัน
raise funds for gambling

default - when a borrower fails to pay borrowed money on time การผิดสัญญา
risk - danger; the possibility that something dangerous or unpleasant might happen ความเสี่ยง
default risk - the danger that a lender faces of a borrower not paying a loan back on time

aware - knowing that something exists, or having knowledge or experience of a particular thing ทราบ

lenders are aware of the high default risk and work to increase customer volumes

Most borrowers are low-income villagers or vendors upcountry, Pol Col Thittawat said. Many turn to loan sharks after financial institutions reject them because they have no steady sources of income or assets to use as collateral. "They have no choice but to accept the loan conditions [from the illegal lenders] knowing full well the interest is way above the legal ceiling," he said. In most cases, the loan is spent on motorcycles, gold jewellery or mobile phones, he said. Some use the loans to raise funds for gambling. On average, customers borrow 3,000-50,000 baht. Lenders are aware of the high default risk and work to increase customer volumes, Pol Col Thittawat said.

debt - an amount of money that you owe หนี้

debt collector - a person or business whose work is to get people to pay back money they borrowed (See Wikipedia)
black helmet debt collectors - scary guys who ride around on motorcycles and threaten and sometimes physically hurt people to get them to pay back loans to loan sharks

helmet - a strong hard hat that covers and protects the head หมวกกันน็อก

employ - to have someone work or do a job for you and pay them for it ว่าจ้าง, จ้าง
employ "black helmet" debt collectors

ruthless - very cruel, will do cruel things to people to get what they want ไร้ความปรานี, โหดเหี้ยม
ruthless to customers who are late on repayments

The lenders also employ "black helmet" debt collectors who can be ruthless to customers who are repeatedly late on their repayments.

typically - usually; normally อย่างเป็นแบบฉบับ
pay a visit - visit people; to go to see a person or people

terrorise
- to make someone feel very frightened by threatening to kill or hurt them คุกคาม ทำให้กลัว

prompt
- immediate or quick ทันที
prompt payment - pay money you owe quickly

physical assault - a physical attack on someone; attacking someone violently การทำร้ายร่างกาย ทำร้าย  the crime of physical violence against another person, includes threats of violence in the US (See Wikipedia)
resort to physical assault

salary - a fixed amount of money that you earn each month or year from your job เงินเดือน

The collectors typically drive motorcycles and wear black helmets when they pay their customers a visit. They can terrorise the customers into making a prompt payment and may resort to physical assault, Pol Col Thittawat said. "The collectors usually get a cut of 20% of the debt they chase after, on top of the 8,000-9,000 baht a month of salary which the lenders pay them," he said.

raided - when the police or army enter a building or place by force

suspects - people that the police think might be guilty of a crime ผู้ต้องสงสัย

in circulation -
money that is currently in a system being used (here money that is loaned out to people)
each lending network has at least 35 million baht in circulation per month

mastermind - the people who had the idea and made plans for some crime or other project 

nab - to catch or arrest a criminal จับ
nab the masterminds - arrest teh people who planned some crime

proxies - Thai people working for foreigners (to help them do business or own things in Thailand)
work through proxies - use other people to do your work (to avoid people knowing who is really doing it)

Recently, police have raided more than 20 predatory loan offices in major provinces such as Nakhon Ratchasima, Khon Kaen, Chon Buri and Phitsanulok, and arrested between 60 to 70 suspects. Each lending network has at least 35 million baht in circulation per month. Police said it is hard to nab the masterminds as they work through proxies.

maximum - the most possible ที่สูงสุด ที่มากที่สุด
fine - an amount of money that you have to pay because you have broken the law ค่าปรับ
maximum fine - the largest amount that must be paid as a punishment for doing something wrong

jail term - the period of time a criminal must spend in jail as a punishment

trade - a job, especially one which needs special skill; occupation อาชีพ

prison terms -
time spent in prison as punishment for a crime
return to the trade after serving their prison terms

turn a blind eye - see something that is wrong or breaks the law and pretend you do not see it
investigation - the process of trying to find out all the details or facts about something in order to discover who or what caused it or how it happened การตรวจสอบหาข้อเท็จจริง  การสอบสวน

The law provides for a maximum fine of 50,000 baht and a jail term of up to three years. Many offenders return to the trade after serving their prison terms. "Pol Col Thittawat said some police take bribes to turn a blind eye. "We're broadening our investigation and going after our own people as well," he said.

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