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CAC reviewing draft microfin code, to meet with lenders

Almost a year into the making of the Code of Conduct that will guide how microcredit licensees operate on consumer related matters, the Consumer Affairs Commission, CAC, says it has received feedback from the Bank of Jamaica and is currently reviewing the recommendations.

The next step, CEO of the CAC Dolsie Allen says is to meet with stakeholders – in particular the associations that speak for payday lenders, Jamaica Micro Financing Association, or JamFA, and the Jamaica Association for Micro Financing, known as JamFin – to get their input on the draft.

The Microcredit Act 2021, which came into effect last July, aims to license and regulate microcredit institutions that provide financing to individuals as well as, micro, small, and medium sized enterprises. It also establishes the BOJ as the regulatory authority.

It also names the CAC as the body with responsibility for making and issuing a code of conduct for licensees on consumer-related matters and the investigation of any complaint brought to it by a consumer of a microcredit service.

Allen has not provided a timeline within which the CAC will meet with industry stakeholders, only noting that it will do so as soon as it can arrange a convenient date, but Deputy Chairman of New Era Financing who also sits as the Chairman of JamFA, Andrew Mais, says microlenders have been eagerly awaiting a copy of the draft code as well as the sit down with the CAC to better understand the parameters within which mircofinancing companies must operate moving forward.

“The implementation of the act took effect last July, and I believe that the code should also have been ready for implementation at that time. Prior to the July date last year, there were intense conversations between the parties through the umbrella Joint Advocacy Committee for JamFA and JamFin, and up to that point, a complete code of conduct wasn’t ready,” Mais told the Financial Gleaner.

“Recently, we were advised that the BOJ reviewed the draft and made their recommendations. As far as I know, the CAC is to resubmit the redrafted Code of Conduct, but we are yet to have any input … we don’t know what it looks like,” he said.

Section 49 of the act sets out that the code, when finalised, obligates licensees to keep the language of loan agreements simple and clear and to ensure that key terms, including rates, fees, and payment dates are clearly identified and defined for the borrower’s attention.

It also will dictate that licensees take all reasonable steps to verify that the borrowers have, or are likely to have, the means to repay a loan, along with the establishment of effective mechanisms and procedures to address consumer complaints.

Where the borrower has breached the repayment terms, microcredit institutions can only engage in lawful methods of enforcement to recoup funds. The finalised code will also set out that measures be taken by microlenders to facilitate access to credit for senior citizens and consumers with disabilities.

Up to late last month, the BOJ said it had issued 13 licences to microlenders. The list of licensees are Access Financial Services, Kingston Finance Limited, Kris An Charles Investments, Nykhana Investment, Trublu Financial Services, Stewart Finance Jamaica, Dolla Financial Services, AIM Financial Corporation, Bluestart Capital (Jamaica) which trades as Ready Cash, Worldnet Microfinance, Eppley Consumer Finance, Investment Options Un Limited, and Seed Investments.

The number of applications remaining to be processed is 80, the BOJ says.

Whispers within the industry are that the CAC is working to have the code implemented by summer, but the CAC itself has not stated a timeline.

“We really cannot give a date for implementation, but we are working towards an early completion,” Allen said.

Microlenders meanwhile have said they want a similar amount of time as regulators to review the draft.

“They have had an extended period to review the draft, and so we would want equal time to go over what’s in the code … at minimum three months. Anything less than that we will resist because it would not be sufficient,” said Mais.

He added that the code will likely impact how microlenders conduct business and may require them to adjust policies, train staff or redirect resources to comply.

“Consideration has to be given to those issues, and so we are still waiting anxiously,” he said.

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