High Court of Malawi Commercial Division has denounced the growing illegal lending of money through usury (katapila) and the use of hiring “muscle men as debt collectors to harass debtors and squeeze them of every drop of blood.”
Katapila is the practice of lending money at excessive, predatory or unlawfully high interest rates.
In his judgement in a case in which Joana Phiri dragged her uncle Smith Kamwangala to court claiming K15, 750 000 due under the katapila loan taken in 2021, Justice Trouble Kalua noted that the practice appears to be going on unabated as several cases of the same nature find their way to court
In the case, the court heard that in October 2021, Phiri lent Kamwangala K3 million repayable with 50% interest in two months. He further borrowed K1 million and K6,000,000.00 sometime in November 2021 bringing the total owing to K10,000,000.00.
In December 2021 Kamwangala repaid K1,5 million by cheque and in February 2022 he repaid K4,5 million in cash. Between March and May the he paid the claimant small amounts of about K100,000.00 on not less than three occasions.
In May 2022 the Phiri engaged mercenaries who came to his house to harass him. They found the Kamwangala’s wife and went away with the Mercedes Benz. Sometime in June 2022 he was informed that the car had been sold and he obliged by facilitating a change of ownership of the vehicle to the new owner.
“He thought the matter was closed then. But he thought wrong. The claimant continued to demand more money even though she never indicated how much the vehicle was sold for and how much was still outstanding. The defendant gave her K500,000.00 on one occasion and K400,000.00 on two separate occasions.
“In July 2022 the claimant again sent mercenaries to his house to squeeze him and it was then that he was informed that his debt was K15,750,000.00. He was not told how this figure was arrived at but was made to sign the loan agreement. The men refused to leave the house until he signed and committed to settle the said sum. It was humiliating. He had no choice but to sign the agreement so that the men could go away.
“In August 2022 the defendant paid K1,000,000.00 (K600,000.00 through the bank and K400,000.00 cash). Again, the claimant hired mercenaries who followed his wife on her way to drop kids off at school and seized the car she was using even though it was a hired vehicle.
“On the day of the release of this vehicle by the order of the Court, on 8th September 2022, the defendant paid K500,000.00 to the claimant’s account as well as K125,000.00 to the owner of the car for the period that the claimant had held on to the car.
“On 26th September 2022 the defendant paid K500,000.00 to the claimant’s account. In total the defendant has paid to the claimant in excess of K9,300,000.00. The lowest the seized vehicle could fetch on the market was K9,000,000.00 and consequently the defendant had fully discharged the debt owed and interest herein,” reads part of the judgement
Although the judgement went in favour of Kamwangala, Kalua took time to address the Katapila issue.
“The evidence clearly points to the practice of lending money at excessive, predatory or unlawfully high interest rates. Whilst there is generally no law preventing an individual from lending money to his friend, but doing so at predatory interests is illegal.
“We see it in this Court every day. Katapila clothed in fine linen to avoid detection. Many a time we are unable to see the transaction for what it really is. This particular one was dressed in a promissory note three-piece suit. Complete with a matching pocket square and silk necktie. That suit having fallen off the Katapila has been exposed. With nowhere to hide.
“The claimant stated that the loans advanced herein were subject to 50% interest compounded every month. The defendant stated that the interest was 50% to be compounded every two months. Whichever way you look at it, the interest was harsh, excessive and unconscionable. This is a proper case in which the transaction ought to be revisited so as to relieve the defendant from these harsh and unconscionable terms, in line with the provisions of the Loans Recovery Act.
We take judicial notice of the growing tendency of people hiring muscle men as debt collectors to harass debtors and squeeze them of every drop of blood. This practice appears to be going on unabated. It has surfaced in this Court in a number of cases. We cannot let it continue without a judicial pronouncement. It is in evidence in the instant case that the claimant hired her brother in law, the said Heather Phanga, to collect the debt on her behalf.
“He, in the company of at least Steve Kadammanja and Flint, known muscle men from Mchesi, descended on the Defendant to carry out the instruction. They confiscated the Mercedes Benz. They pounced on the Defendant’s wife whilst on an errand as innocent as dropping kids to school. Harassed her by the road side. Overpowered her and took control of the Belta she was driving.
“Tricked her into believing they were going together with her to her house to meet and discuss the issue with her husband, the Defendant herein. She didn’t owe them anything. Whatever issues there might have been were with the husband. The moment she alighted from the vehicle into her house they decamped. With the Belta. This is mob (in)justice. It is illegal. Debt collection is the preserve of legal practitioners.
“In our view, someone who is not a legal practitioner may not, therefore, collect debts for a fee, a gain or a reward. If he does so, he commits an offence, for which he may suffer a long prison term. However, even the lawyers do not just go about seizing other people’s property in their debt collection exercise. The lawyer would almost always write a letter of demand.
“And if the debtor does not accede to it, they invariably resort to the Courts for help. A summons would be taken out, kick starting debt collection proceedings, all the way to execution by the Sheriff of Malawi in the event of judgment. That is the way the law works. Anything else is pure thuggery and should, in all appropriate cases, be visited with the necessary sanctions permitted by law,” reads the judgement
