Loan sharks or Mashonisa, as they are known in the South African townships, have caused so much misery in people’s lives. Confiscated possessions and violent threats are just some of the things that consumers have endured in the hands of loan sharks. But how do you know that you are dealing with one?

Loan sharks or Mashonisa, as they are known in the South African townships, have caused so much misery in people’s lives. Confiscated possessions and violent threats are just some of the things that consumers have endured in the hands of loan sharks. But how do you know that you are dealing with one?

What is a loan shark?

A loan shark or Mashonisa is a person who lends money to the community at exorbitant interest rates. This lender can charge up to 100% interest.

According to Lebogang Selibi, media relations officer for the National Credit Regulator, this credit provider is not registered with the National Credit Regulator (NCR), but was supposed to be registered as per the National Credit Act.

How to recognise a loan shark?

According to the NCR findings in 2013, loan sharks:

  • Charge high interest rates
  • Do not conduct affordability assessments
  • Offer no proper credit agreement

Selibi says every registered credit provider should have a certificate which has their registration number.

“Consumers should demand to see the certificate to confirm registration,” she advises.

Why do people borrow from loan sharks?

There are many reasons that drive people to loan sharks. These include:

  • Inability to secure credit from registered creditors
  • Desperation
  • Needing a small amount of cash
  • Needing cash fast

Is the consumer obliged to pay the loan shark?

The law says a person who is required to be registered as a credit provider, but who is not, cannot extend credit to consumers.

Therefore, since these lenders are operating unlawfully, the consumer is under no legal obligation to honour their debt repayments. However, a lot of loan sharks will not hesitate to use illegal ways of getting their money back – whether by threats or violence.

How is the law dealing with loan sharks?

According to Selibi there were amendments to the NCA that required all credit providers to register with the NCR.

“The zero threshold for credit provider registration came into effect in November 2016,” she says.

“Credit providers were required to register with the NCR regardless of the amount of the loan as was the case prior to the amendments,” she adds.

In 2013 the NCR arrested illegal credit providers through its Operation Siyanda. This initiative was aimed at those credit providers that contravened the NCA. During this operation, the agency recovered pension cards, identity documents and bank cards.

“The NCR takes regular pro-active steps to investigate unregistered credit providers and registered credit providers,” adds Selibi.

Where can you go for a loan?

Selibi advised consumers to approach legal credit providers.

“Consumers can approach any of the registered credit providers to apply for credit that they can afford to pay back,” says Selibi.

Do not be a victim of loan sharks. To lodge a complaint, email commplaints@ncr.org.za