CI-NEWS

Gov’t seeks heavy penalties for wilful loan defaulters.

2019-12-09

No: 460

Gov’t seeks heavy penalties for wilful loan defaulters.

Persons who wilfully/voluntarily decide not to pay their debts incurred with credit institutions will henceforth be liable to court action resulting in the payment of heavy fines and imprisonment.

This follows the tabling of bill No 1063/PJL/AN to lay some rules governing credit activities in the banking and micro-finance sectors in Cameroon.

Section 20 of the bill states that “Whoever, in bad faith, defaults on a loan granted by a credit provider shall be punished with imprisonment for from 6 (six) months to 5 (five) years or with fine of from 100000 (one hundred thousand) CFA francs to 100000000 (one hundred million) CFA francs, or with both such imprisonment and fine”.

Those who use false documents to conclude a credit transaction are also liable to sanctions. Section 22 of the bill states: “Whoever with intent to infringe the rights of the credit provider, uses or attempts to use false documents to conclude a credit transaction shall be punished with imprisonment for from 6 (six) months to 3 (three) years or with fine of from 100000 (one hundred thousand) CFA francs to 5000000 (five million) CFA francs, or with both such imprisonment and fine”.

The credit institution shall have no more than 60 days to institute criminal proceedings against the borrower of bad faith, failing which it shall be precluded from doing so, Section 28(1) of the bill states.

But prior to legal proceedings, the credit institution has powers to issue a ban on credit subject to regularization of a loan which shall entail a ban on conclusion of a credit transaction with any other credit institution.

Presenting the bill before the finance and budget committee of the National Assembly last Friday, Louis Paul Motaze, finance minister, said “The objective pursued by government is to reframe the credit granting procedures and strengthen the internal mechanisms of repression of voluntary non-payment of credits”.

He said the banking and micro-finance sectors are characterized by high level of outstanding or compromised debts, noting that as of third quarter of 2019, outstanding loans for credit institutions stood at 599.7 billion, representing 16.7 percent of customer loans, and 96.6 billion for MFIs, representing 32.6 percent of customer loans. This far exceeds the global average which according to World Bank data, stands at 3.45 percent, the explanatory statement on the bill states.

Outstanding loans have negative consequences on Cameroon’s financial system, including the compulsion of credit institutions to impose high interest rates on loans they grant and the jeopardizing of the sustainability of some credit and micro-finance institutions, notes the statement.

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Gov’t seeks heavy penalties for wilful loan defaulters.