The increased regulation of micro-financing institutions such as FastCash and QuickCash is one of the changes effected by the passage in Parliament on Tuesday, August 30 of the Money Services Business Amendment Act 2022.
The measures were supported by Members on both sides of the House.
The legislation, which was tabled by Minister of Finance, Camillo Gonsalves on Tuesday, August 30 made amendments to the Money Services Business Act that has been in existence since 2005.
“The entities responsible for the regulation of the Financial Sector in St Vincent and the Grenadines and regionally must by necessity, from time to time, bring amendments to this honourable House for the laws to keep pace with evolutions in the delivery of financial services in St Vincent and the Grenadines,” the Finance Minister stated.
“And the Money Services Business Act is one whose language and whose practice has been outstripped by evolutions in the (financial) sector in a number of ways.”
One of these ways, he indicated, is the “emergence and continuing growth” of the microfinance sector. (Microfinance is defined by Investopedia as “a type of banking service provided to unemployed or low-income individuals or groups who otherwise would have no other access to financial services”)
Another is “in areas related to the regulation of mobile cash apps, in areas related to regulating the physical premises in which we receive remittances” and “in our continuing quest to remain apace with the ever evolving anti-money laundering and financing of terrorism requirements of the international community.”
The Minister informed Tuesday’s meeting of the House of Assembly that there are approximately five micro-financing institutions operating in the country: FastCash (SVG Ltd); QuickCash; Courts SVG limited (Ready Cash) (loan); Cashwiz; and Advanced Cash.
He said that “at present micro-financing companies fall under the anti-money laundering and counter-financing of terrorism legislative regime in St Vincent and the Grenadines and would be captured for supervision for those purposes.”
“However, there is a substantial gap between regulating them from an anti-money laundering standpoint and regulating them in a prudential sense.”
For areas such as “monitoring the customer protection; monitoring interest rates; monitoring disclosure, the type of work that they do…”, he noted, “none of that would come under money laundering restrictions. So there’s a gap there that has to be filled.”
He noted further that the regulation of micro-financing institutions “can achieve the following: first it can provide some legitimacy to the business operations of the companies that carry on their services, and can promote a stable expansion of the industry while protecting consumers.”
“Second it can ensure the viability of the industry and encourage the relevant entities to operate efficiently and promote fair market pricing, particularly in relation to issues such as onerous contractual terms, excessive interest rates and over indebtedness.”
And third, it will bring us into conformity with international best practices.
When the Minister discussed the 12 clauses of the Bill in the latter part of his contribution, the new consumer protection provisions for micro-lending entities were highlighted.
These sections inserted into the Act will mean that the loan agreement of the micro-lending businesses should be disclosed to the consumer before signing.
“And that (the loan agreement) would contain particulars related to the name and occupation and place of residence and business of the parties, the date on which the loan is being made and disclosed the amount of the loan, the terms of the repayment, the rate of interest.”
Further, the duration of the repayment period of the loan, when repayment begins, installments payable, and the full cost of the loan in percentage rate and dollar values.
“So the person who goes to get $1000 from one of the micro-financing entities will know that the interest rate is X, but will also know that what that means, that at the end of it, it means that to get this $1000 you’re paying however much you’re paying to get the $1000.”
Also to be listed is “the amount of interest and the penalties, the terms and conditions of repayment, how interest on default payments is to be calculated, the property if any that is going to be given as security.”
There will also be “restrictions on interest rates and fees, money lending advertisements, as well as penalties for false statements and representations and threatening of borrowers.”
The Minister said some micro-lending entities in their collection of the loan repayment, can “push the envelope on aggressive, and that’s something that we have to pay attention to as well.”
However, the amendments to the Money Services Business Act are also concerned with mobile payment service providers such as Payswif and Squeeze Cash.
“The growing use of mobile payment service providers globally has created some challenges to regulatory bodies and private sector institutions to ensure that these products and services are not misused for money laundering and for terrorist financing.”
In terms of the regulation of these providers through these amendments, the Minister noted that “This is a level of regulation that they are welcoming because they think that it will expand their opportunities to do business and increase their offerings here in St Vincent and the Grenadines.”
Thirdly, the amendments cover the adequacy of premises for money transmission companies such as Money Gram and Western Union.
“The existing Act, our Money Service Business Act, does not require the approval of the place of business to have a money service business.
So there’s no current requirement that you have to get approval to put your Western Union or your Money Gram inside of Joe’s rum shop,” the Minister said.
“What this is trying to do and what the trend in the region indicates is that regulatory bodies are being asked to approve the place of business for these money service businesses and for the explicit requirement of that approval to be stated in law.”
“There are customer service reasons, there are comfort reasons, there are also security reasons,” he said.
When the floor was opened for debate on amendments the first to speak from the Opposition side was senator, Shevern John who noted that they were in “full support” of the amendments.
“We see that what we were operating on previously was one to question: why has this taken so long in coming?” John said.
Joining the senator to provide support from their side of the House was the Leader of the Opposition, Dr Godwin Friday, senator Israel Bruce and Member of Parliament for East Kingstown, Fitzgerald Bramble.