KUALA LUMPUR, Dec 4 — Loan sharks are now trawling cyberspace, particularly social media platforms like TikTok, making it increasingly challenging for borrowers to distinguish between licensed moneylenders and illegal operators.

As of October this year, Bukit Aman Commercial Crime Investigation Department has recorded 777 cases linked to loan sharks.

Even school students are being targeted. In a recent case, a 15-year-old boy from Selangor revealed he had racked up RM13,000 in debt to 12 loan sharks after responding to an advertisement on TikTok.

So, how can you identify a loan shark? Here are some key warning signs to watch out for:

Legal moneylenders must be licensed and display their licences at their business premises.

Under the Moneylenders Act 1951, moneylenders are required to apply for a licence from the Registrar of Moneylenders. This licence, unless revoked earlier, is valid for two years, and moneylenders must apply for renewal at least 60 days before it expires.

Unlicensed moneylenders can face fines ranging from RM250,000 to RM1 million, imprisonment for up to five years, or both. Repeat offenders may also be subject to corporal punishment in addition to the penalties mentioned.

The Act also mandates that licensed moneylenders must display their original licence at their business premises at all times. Failure to do so can result in a fine of up to RM10,000, a jail term of up to six months, or both.

Borrowers have the right to request to see the moneylender’s licence to ensure they are dealing with a legitimate, licensed moneylender rather than a loan shark.

Borrowers must obtain a duly stamped copy of the agreement

Section 16 of the Moneylenders Act requires that the moneylending agreement be signed by all parties and duly stamped before a copy is provided to the borrower.

If this requirement is not met, the agreement is deemed unenforceable, and the moneylender may face a fine of up to RM10,000, imprisonment for up to 12 months, or both.

This is often the most glaring omission in loan shark arrangements. Victims are typically asked to sign an agreement but are not given a copy of it.

Reasonable versus excessive interest rates

Loan sharks typically charge exorbitant interest rates, which can range from 10 to 20 per cent per week.

However, Section 17A(1) of the Act states that the interest rate for a secured loan (one backed by collateral) cannot exceed 12 per cent per annum, while the interest rate for an unsecured loan (without collateral) cannot exceed 18 per cent per annum.

Any interest rates exceeding these limits render the moneylending agreement void and unenforceable.

Strictly no house or workplace visits

Loan sharks are notorious for intimidating defaulters by throwing red paint at their houses or workplaces. They may also resort to shaming tactics, such as posting pictures of defaulters in their neighbourhoods, claiming they owe money to loan sharks.

However, Section 29(B) of the Act strictly prohibits moneylenders or their representatives from visiting or monitoring a borrower’s home or workplace.

A moneylender found guilty of this offence can be fined between RM50,000 and RM250,000, or jailed for up to three years, or both. Representatives of the moneylender who are found guilty can face fines ranging from RM10,000 to RM50,000, imprisonment for up to two years, or both.

If the harassment causes harm to another person, the offender may also face up to two years of imprisonment and whipping under the Act.