Court Fix Loan Sharks
By Dickson Jere
She was broke and desperate for cash. She went and borrowed K216,000 from a registered money lender as a short-term loan. But, as security, she was made to sign documents – which she did not understand entirely as she was not represented by lawyer.
Simply put, she signed-off an assignment and sale of her house to the money lender in case of default. However, she was given an option of buying-back her house in four months by way of paying-off the same debt. As fate had it, she defaulted and therefore lost the house to the money lender. This prompted her to launch a case against the money lender in the High Court of Zambia (Commercial Division) arguing that she was tricked.
You see, her argument was that she did not enter into any agreement for the sale of her house but rather a loan transaction using her house as collateral. The purported sale of the house was therefore illegal as she did not sign the papers knowingly or willingly. She further argued that the interest charged by the money lender was “excessive, unconscionable and as such illegal”.
After hearing the evidence from both parties, Judge Edward Musona did justice to the case and dealt with this growing culture by money lenders of forcing clients into sale of houses.
“I find that the contract of sale between the plaintiff and the defendant is illegal and do hereby declare it null and void ab initio…” Judge Musona ruled.
“What I discern is that the intention of the parties was that the money was a loan. The property was collateral”.
On excessive interest, the Court agreed that money lenders were not allowed to charge beyond what is provided for in the Money Lenders Act of Zambia. He therefore ordered that the house be given back to the owner and that she should payback the loan in 90 days with minimal interest as chargeable under the law.
This case is a big blow to the money lenders but victory to the many victims that have lost property in similar manner. The Judge ably handled this matter and went down to the “intention” of the parties in the transaction and found that the lady was tricked! Many Zambians have lost property under similar transactions where they were made to sign sale agreements when in fact the property should have been registered as “collateral”. So this Judgment is timely and will help lenders and borrowers to be careful when dealing with each other in loan transactions in future.
For more details; read the case of Eva Chiboni v New Future Finance Company Limited – 2020/HPC/0776