Lending made easier...

We have all encountered it. Once in a while, someone wants to borrow money from us. Question is, can we recover this money if the loan turns bad?

The Malaysia Moneylenders Act renders all moneylending activities by non-licensed moneylenders to be void. This means that the moneylenders would be unable to enforce the loan in a Court of law. This provision has cast some doubts as to whether a friendly loan can be recovered through the legal process.

In the recent Court decision of Floral Trends Ltd v Li Onn Floral Enterprise (M) Sdn Bhd, the Court answered the question with a resounding "yes". An unlicensed moneylender can recover the loan, even with interest, on the condition that it can show the court that the lending was a "one-off" incident, and that the lender is not actually carrying out a moneylending business.

On the one hand, that seems fair since a borrower should by right return monies borrowed. But on the other hand, the purpose of the Moneylenders Act is to regulate the terms of borrowing (including interest chargeable), and by allowing one-off incidents, the Court is removing the protection afforded to the consumer under the Moneylenders Act. It may be difficult for the borrower to show that the lender is in fact an illegal moneylender, and there is nothing stopping the lenders from pleading a series of "one-off" incidents.

Better perhaps to adhere to the principle, "Neither a borrower nor a lender be..."