Friday, 14 September 2012

Laws for ordinary people

The law is a magnificent thing.

A decent legal framework is the foundation of a civilisation. It sets the rules we should abide by and, just as importantly, defines the freedoms we don’t have. Not the freedoms we have, the ones we don’t have. Something people often overlook is that a civilised society is permissive, not prohibitive. All things are permitted until they are prohibited. Until a law is passed saying that the wearing of a purple t-shirt is prohibited, wearing purple t-shirts is permitted. Until something is made illegal you’re allowed to do it.

We’re lucky in Botswana to have a fairly decent legal system. Obviously it’s not perfect but it’s a whole lot better than many others. Mistakes are still made but very often they’re later overturned. When a hard-working, hugely respected, committed and highly talented cardiologist is persecuted by an establishment doing their best to put him out of business the Appeals Court will step in and belatedly put things right, allowing him to continue saving lives. Purely hypothetically of course. When our Government makes a mistake it’s possible to take them to court and have their decisions overturned. That’s the sign of a democracy.

Consumers should also be grateful for our laws. They should also be grateful for some of the rulings that judges occasionally make. My favourite relates to the “in duplum” rule.

This is a very pleasing bit of common law that is respected throughout our region. According to the very learned Judge Dow:
“the in duplum rule serves to aid debtors in financial difficulties by holding that it is unlawful to recover interest equal to or more than the capital sum upon which interest had accrued” [and that] “the in duplum rule cannot be waived and circumvention of the rule cannot be tolerated by courts”.
In simple terms a loan shark cannot enforce, as we heard some months ago, a debt of over P13,000 for an initial loan of a mere P2,500. If this claim ever reaches a court the judge will laugh in the loan shark’s face. Unfortunately many micro-lenders are relying on borrowers’ understandable fear of going to court. Nobody wants to end up in front of a magistrate or judge but the irony is that that’s where the law is best applied. Outside of court a shark can demand whatever he wants. As soon as the law can be exercised things become more respectable and civilised.

It’s important to understand that the “in duplum” rule isn’t there to protect unscrupulous borrowers, it’s there just to place a limit on how sleazy lenders can be and to prevent the really sleazy ones from going too far.

In Mmegi last Friday it was reported that “Over 800 micro lenders go underground”. According to the CEO of NBFIRA, only 151 lenders have come forward to register with NBFIRA since being required to do so. The vast majority have, for whatever reason, decided not to obey the law. It’s possible that some have decided to go into a more legitimate line of business, some perhaps have stayed in the same line of business and are operating illegally, others are no doubt selling drugs, pimping prostitutes or trafficking slaves.

I’m not joking. The biggest mystery for me about the micro-lending industry is where some of them get their money. All lenders need to start with capital. They need a large amount of ready cash to start their business, to make those first loans. They also need a large operating balance to lend the often significant amounts they offer but where does all that cash come from? I don’t think it’s hard to guess where some of them get that money: from the proceeds of crime.

It’s hard to think of a better way to launder money than by setting up an unregistered micro-lending company. The amounts of cash flowing through the company would be significant and very hard to trace. Who knows who the real borrowers are, whether they really exist or whether their real name is M. Afia. Luckily NBFIRA seems to be a fairly formidable organisation. The people I’ve met who work there all seem to be committed to making real changes to the industries they regulate. I can’t imagine them just ignoring the missing 800 loan sharks. Sooner or later an angry customer who has been abused by an unregistered loan shark will complain and NBFIRA will take action against them.

It’s not just the shady parts of the business world that the law can affect. Recently one of my favourite organisations came under the gaze of the Appeals Court.

The case was actually rather dull to the people not involved. It related to the liquidation of a company and the rights various creditors had to claim money from remnants of the company and the new owners of the company’s assets. All a bit boring.

Except for one thing. One of the parties involved was our dear friend Botswana Power Corporation. Were they entitled, the Appeals Court was asked, to refuse to supply power to the new owners while there was an outstanding debt owed by the previous customer, the liquidated company?

Many of us have experienced this. BPC refuses to supply you with power until the debt owed by the previous owner or tenant of the property is repaid, often demanding that YOU repay it, someone else’s debt.

Not any more. The Appeal Court ruling included this:
“So successive owners are not responsible for payment of the bills of earlier owners, nor for the bills of their tenant consumers, and nor are owners or subsequent tenants responsible for the unpaid bills of earlier tenants, as is a common misconception.”
So there, BPC. Stop it now. The Appeals Court has spoken. The LAW says you can’t do that any more, OK?

This is another occasion when we should celebrate our legal framework. Every so often it produces a ruling that is sensible, logical, reasonable, relevant to ordinary people and, above all, just.

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