And no-holds-barred loan sharking will probably remain part of our credit landscape for as long as there are customers.
But while there are laws in place to curtail their practices, loan sharks often operate beyond the reach of regulators and the legal system.
Providing short-term, high-interest loans to risky borrowers, loan sharks are operating under the radar, leaving consumers vulnerable and exposed to abuse.
In May last year, online micro lender Wonga issued a report, compiled by research firm Eighty20, showing unregistered lenders or “loan sharks” are more widespread than previously thought.
It estimated there were at least “40 000 operating in South Africa, at a ratio of 1:100 for every household in informal settlements”.
On average, the loans ranged from R500 to R1 000, with interest charged between 30% and 50%.
They offer “quick and easy access to small, short-term loans, despite not having any legal protection”.
In poor communities, they serve a vital role because they offer credit to people who wouldn’t otherwise be able to access credit.
The study also found that these “mashonisas” are not the stereotypical crooks in dark, smoky offices - they are ordinary community members, many of whom are in formal employment.
The Wonga study found one had been a bus driver, another worked at the post office, and one ran a mashonisa with his wife who worked in a hotel. And those who hadn’t worked formally, had sold vetkoek and fried fish along the roadside, while another had sold Avon and Tupperware products.
Brett van Aswegen, the Wonga SA chief executive, said: “There is no clear demographic that identifies a mashonisa; they aren’t all big, scary men. They are ordinary people from the community who have some cash available and see this as a viable form of employment.
“Start-up cash can be as little as a few hundred rand but are typically payouts from a retrenchment settlement or provident fund.”
For loan shark customers (or victims) such as Sashnee and Thabo, who work and live near loan sharks, the proximity is frightening.
Sashnee took a R2000 loan in August last year from a loan shark, who charges 40% interest a month.
“I failed to meet the repayments, and the outstanding amount will be R6 000 as of tomorrow. The loan shark and her sister, an ex-colleague of mine, have harassed me via phone calls and SMSes (which I still have on my phone), as well as visits to my workplace and reporting to management there.
“I acknowledge that I am responsible for the amount I borrowed of R2 000, but the interest is unreasonable. Furthermore, the loan shark is also a police officer. I doubt police officers are allowed to earn a second income in such a manner.”
Thabo borrowed money from a loan shark, but stopped paying because he lost his job.
“Due to my circumstances changing, I called him and his wife to explain but they refused to hear me out and now the interest is too much for me to pay. He called my wife and threatened to harm my family if I don’t pay him by the 10th of the month. I don’t know where to go and what to do.”
Before 2016, if you wanted to loan money to anyone and charge interest, registration with the National Credit Regulator was required if the loan threshold value was set above R500 000. After the National Credit Act amendment came into force in November 2016, Trade and Industry Minister Rob Davies reduced the threshold to zero.
If you want to lend money and charge interest, you must be a registered credit provider.
Before the amendment, Section 40 of the NCA imposed two registration requirements on those involved in lending money: Once the person had at least 100 credit agreements; or when the principal debt owed to him/her under all of their current credit agreements exceeded R500 000.
Failing to register as a credit provider will result in the agreement being declared illegal by the courts and the unregistered credit provider will have limited legal recourse against the credit consumer.
Interest rates should not exceed those legally set out and collection methods such as retaining ID books, PIN codes and bank cards are illegal.
The NCA allows for a maximum of 31% interest to be charged a year. For a short-term loan that does not exceed six months, interest rates cannot exceed 3% a month.
The NCA does not regulate stokvel agreements between members but if you’ve loaned from a stokvel, you can complain to the regulator.
NCR spokesperson Lebogang Selibi advises consumers to lodge a complaint at www.ncr.org.za.
Selebi says if consumers are being overcharged on loans, they should report it to the NCR.
And if loan sharks are threatening them, they should report it to the police.