Cambodian authorities warn of penalties for unlicensed lending

The Ministry of Interior, National Bank of Cambodia and Non-Bank Financial Services Authority said in a joint statement that some individuals and legal entities were lending without prior authorisation. Examples included short-term daily-interest loans, pawnbroking, in-person lending and online lending. The authorities again told operators to stop immediately or face legal action. The joint statement, issued on September 5, cited threats, intimidation, excessive profiteering and the retention of identity cards, residence books, equity cards for low-income households and National Social Security Fund membership cards as loan security. The authorities said these activities seriously harmed livelihoods, public safety and order, the investment climate and Cambodia’s social economy, and could incur penalties under applicable law. Under Article 2 of the Law on Banking and Financial Institutions, offering the public any form of credit for consideration, including finance leases and commitments by signature, constitutes banking business. Banking and financial businesses must first obtain a licence or authorisation from the National Bank of Cambodia, the supervisory authority, before providing services to the public. Under Article 55, anyone who habitually conducts unauthorised banking business for the public, as an individual or on behalf of an entity, faces one to five years in prison and a fine of 5 million to 250 million riel, or either penalty. The establishment may also be closed. Pawnbroking and security-by-transfer businesses must obtain a licence from the Real Estate Business and Pawnshop Regulator under the Non-Bank Financial Services Authority. Article 33 of the rules on licensing and permits provides that operating without a licence or with one expired for over six months incurs a fine of 10 million to 20 million riel from the regulator and requires immediate closure of the business activity. Operating without a business permit or using one expired for more than six months incurs a fine of 5 million to 10 million riel from the competent department and requires an immediate halt to business. Continued violations double the fine. The statement said taking identity cards, residence books, equity cards or National Social Security Fund membership cards as security is inconsistent with the Civil Code, as those documents have no commercial economic value and cannot serve as loan collateral. Article 129 of the Law on Civil Registration, Vital Statistics and Identification states that a Cambodian national identity card is an official identity document. It may neither be transferred to another person nor used to create a security interest in rem. Preah Sihanouk Provincial Television. Reporter: ង៉ែត ពិសាន្ត