Malaysian Loan Sharks Hire Women to Shame Defaulting Debtors

Malaysian Loan Sharks Hire Women to Shame Defaulting Debtors

• March 27 (Bloomberg) -- Malaysian loan sharks have a new weapon in their growing struggle to get borrowers to repay debts: beautiful women.
  
  “They go to your office or house and sit there” to shame you into paying, said Michael Chong, 60, who has worked for two decades as a mediator between the illegal lenders and their debtors. “If it’s your house, they will wait outside and make lots of noise, and you cannot wallop the girl.”
  
  That’s in addition to the traditional incentives such as putting debtors in a cage, splashing their houses in red paint or breaking their limbs, said Chong, head of the Public Services and Complaints Department of the Malaysian Chinese Association, the second-biggest political party in the ruling coalition.
  
  The shortage of bank credit is pushing more people to loan sharks and causing a growing number to default, said Chong, who negotiated a record 56.6 million ringgit ($15 million) of debts last year and expects this year’s total to be higher. That’s forcing the lenders to look for new ways to recover the debts, he said.
  
  Job losses jumped 67 percent in the final quarter of last year to 24,033 as the global recession pushed bankruptcies to a three-year high. The government this month announced a 60 billion ringgit ($16 billion) stimulus plan, predicting that the economy may contract this year for the first time in a decade.
  
  Loan approvals by banks slid for a fifth month in January.
  
  “When there’s a shortage of supply, people will look at other avenues,” said Nazir Razak, chief executive officer of Bumiputra-Commerce Holdings Bhd., Malaysia’s second-biggest bank.
  
  ‘Big Earhole’
  
  Chong said gamblers traditionally made up about 80 percent of clients for loan sharks, known in Malaysia as Ah Long, from the Cantonese phrase “daai ji lung,” meaning “big earhole.” Now, the economic slump is driving more businesses, such as building subcontractors, to seek illegal loans, said Chong, whose arm was dislocated in 1990 by a loan shark that resented his interference.
  
  More than 10,000 civil servants are “trapped” by the loan sharks, state news agency Bernama reported last month, citing Ahmad Shah Mohd Zin, the secretary-general of the Congress of Unions of Employees in the Public and Civil Services, a national trade union.
  
  Chong has built a career dealing with public complaints over trafficking, missing persons, land scams and loan-sharking. In 1987, the party created a department for him with five assistants to ease a backlog. He has dealt with 30,000 cases since then, he said.
  
  In 2004, he had a 20-episode television series called “Michael Chong’s File” to warn the public of crimes.
  
  Repeat Offenders
  
  Police say efforts to curb unlicensed money lending are hampered because many borrowers are repeat offenders without access to other funds. Loan sharks typically advertise by sticking their cards or posters on phone booths, public toilets, lamp posts, and on the walls of shops and factories.
  
  “We are aware what the loan sharks are doing,” Inspector General of Police Musa Hassan said in an interview. “The problem is the people are still going to seek help from them.”
  
  Most borrowers turn to these lenders because they need the money fast, while bank loans can take months to approve, said Chong.
  
  “They can bank the money directly into your account,” he said. “You don’t have to see them and they can have the money within 10 minutes.”
  
  Some banks are trying to take some of the business by speeding up approvals. Bumiputra-Commerce’s CIMB Bank Bhd. formed CIMB Express, where personal loans of 3,000 to 50,000 ringgit can be approved within 24 hours, said Nazir. Rates start from 3 percent per month for a 5-year repayment schedule, the bank’s Web site says.
  
  10% Per Week
  
  The illegal lenders charge 10 percent interest per week for some loans, said Nadzim Johan, executive secretary of the Malaysian Muslim Consumer Organization, who had 100 cases referred to his consumer movement in 2008 and expects that to double this year.
  
  “It’s a huge social problem now,” Nadzim said. “It has created a lot of broken homes.”
  
  In one case, a South Korean businesswoman borrowed 100,000 ringgit and ended up paying 11 million ringgit over a few years because she couldn’t transfer funds in time, he said.
  
  “She started very small,” Nadzim said. “Most things start very small. Then it snowballs.”
  
  Borrowers include owners of small businesses, contractors, doctors, lawyers, gas-station owners, politicians, former senior civil servants and even the police, he said.
  
  Some loan sharks make 12 million ringgit a day, he said. “It’s become part of the infrastructure in society.”
  
  Harder to Collect
  
  A loan shark who gave his name as Loh, said it is getting harder to collect debts because of the slump. “They don’t follow” the payment schedules, he said.
  
  Chong said he has advised some debtors to run away and seek work in another country, and only return after a few years to pay their debts.
  
  “I’ve had cases where they chain them and put them under a cage,” Chong said. “They will throw paint, put up posters to shame you, take a microphone outside your house. Only the stupid ones will use violence.”