Thursday Nov 14, 2024
Thursday Nov 14, 2024
Thursday, 9 July 2020 03:05 - - {{hitsCtrl.values.hits}}
Abolishing illegal leasing companies, ending confiscation of vehicles, regulating penal rates, and differentiating between hire purchases and leases were among the recommendations listed out by the committee appointed by the Central Bank to report on the unfair practices of the sector.
A special committee was appointed by the Central Bank following the president of a three-wheeler association being assaulted to death when he approached an unregistered leasing company after it confiscated the vehicle of a member. The incident sparked widespread public anger and also resulted in a suspension of confiscation ordered by the Government.
The Governor of the Central Bank Prof. W.D. Lakshman appointed a three-member committee to examine and report on the irregularities and illegal activities of the finance and finance leasing businesses, and to make recommendations to curtail such activities.
In response to the request made by the committee, more than 200 views, proposals or complaints were sent in by the general public, civil organisations, financial sector associations, and other interested parties in the finance and finance leasing business.
The committee, having examined such representations, had completed the report, and the report was handed over to the Governor yesterday.
The committee has placed particular emphasis on the illegal and irregular activities in the finance leasing business and has identified two set of activities in the business of finance leasing that require attention; namely, activities of the registered finance business and the activities of the illegal operators.
Further, the committee has identified that the activities emanating from the aforesaid categories mainly revolve around the problems related to the recovery of possession of equipment, abuse of the terms and conditions in the finance lease agreements entered into between the lessor and the lessee, and certain loopholes in the provisions of the Finance Leasing Act, No. 56 of 2000.
Accordingly, the committee recommended short-term and long-term proposals, of which the short-term proposals are expected to address the current problems by providing more efficient solutions to the problems identified and the long-term proposals mainly focus on amendments to the Finance Leasing Act.
The short-term solutions also included prevention of the use of force in the repossession of equipment, abolition of illegal leasing institutions, regulation of forms used for entering into finance lease, awareness of the public and the Police on finance leasing, actively regulate the value paid by lessee for an equipment in a finance lease, issuing directions related to ‘substantial failure’ and issuing directions defining the word ‘notice’ given under Section 39 of the Finance Leasing Act.
It also called for issuing directions to specify whether a facility is a hire purchase facility or a finance lease, regulation of penal rates, and regulation of valuation related to finance leases.
Longer term recommendations were amendments to the Finance Leasing Act on the aspects to expedite the process of recovery of possession of equipment through the court, make the concealment of equipment a criminal offense, streamline provisions relating to ‘offence’ in the Finance Leasing Act, prevent the use of the word ‘leasing’ by illegal operators, and transfer or assignment of lessee’s rights.
The report also called for broader consumer protection in the financial sector as well.
