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Loan deductions to resume

Tefo Tefo

MASERU — Civil servants who owe moneylenders have to brace themselves for more distress.

The government wants to continue deducting money from civil servants who owe moneylenders even though the financial institutions have not complied with last year’s Court of Appeal judgment.

Last year the Court of Appeal confirmed an earlier High Court judgment that ruled that the moneylenders were charging borrowers more than the stipulated 25 percent.

The service, administration and initiation fees that moneylenders were charging were illegal.

The Court of Appeal ordered that the money lenders and the civil servants should agree on an independent accountant to recalculate the loan amounts at the interest rate of 25 percent.

The judgment said the recalculation should state whether the civil servants have already settled their debts or they still owe the moneylenders if their loans are calculated at 25 percent interest rate.

The government then stopped the deductions while it waited for those conditions to be met.

But things changed last week when the office of the accountant-general issued a savingram to some government departments announcing the government’s intention to resume the deductions.

This is despite the fact that the independent accountant, appointed by the moneylenders and civil servants, has not yet started recalculating the loan amounts as ordered by the Court of Appeal.

The savingram, dated January 7, orders the director of the Teaching Service Department, heads of salaries for the Lesotho Defence Force, National Security Services, police and pensions office to accept affidavits from the moneylenders giving details of how much each of the borrowers owes.

According to the savingram the intention is to start deductions from the end of this month.

The savingram says: “As reported, kindly note that following the Court of Appeal judgment on the cited cases, MFDP (Ministry of Finance and Development Planning) suspended moneylenders’ deductions in December 2010 and advised moneylenders to submit affidavits certifying compliance to the judgment to facilitate the processing of deductions from January 2011.”

This, the civil servants say, is contrary to the judgment of the Court of Appeal which clearly said an independent accountant should be hired to recalculate the loan amounts.

The civil servants, who wished to remain anonymous until they have spoken to their lawyer, said the savingram undermined the Court of Appeal decision.

“The judgment speaks about recalculation of loan amounts by an independent accountant not the affidavits,” they said.

However, they are still to meet their lawyer to discuss how they will stop the government from making the deductions until an independent accountant has recalculated the loan amounts.

Although the savingram is addressed to five government departments, sources say instalments are likely to be deducted from the salaries of all civil servants who have loan contracts with moneylenders this monthend.

Civil servants last year sued three prominent money-lending companies for charging exorbitant interest rates on their loans.

The civil servants had entered into loan agreements with Select Management Services, B-Blue Financial Services and Afrisure (EEZY Management Services).

The civil servants said the moneylenders were charging unlawful interest rates of up to 65 percent per annum.

When the High Court ruled in favour of the civil servants the moneylenders appealed to the Court of Appeal.

The Court of Appeal in October confirmed the High Court judgment that the excessive interest rates charged by the moneylenders were unlawful.

Most money-lending companies have since shut down while others are on the verge of collapse.

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