Trapped in the jaws of loan sharks| MENAFN.COM

Tuesday, 09 August 2022 10:59 GMT

Trapped in the jaws of loan sharks

(MENAFN- Khaleej Times) Low salaries and a rampant rise in the cost of living have driven expatriates in the UAE over the edge. When loans taken from friends no longer seem enough to tide over a personal financial crisis, desperate expatriates are forced to approach underground illegal pawn shops - a practice imported from Asian countries.

People are even known to have committed suicide due to their inability to pay back loans taken in this fashion.

Modus operandi

Cash-strapped residents who can't deal with banks due to loan eligibility issues go to pawn shops and pawn an item of value such as jewellery, cars, mobile phones or even passports in some cases. Pawnbrokers charge exorbitant interest rates varying between 20 and 40 per cent. When residents manage to raise the loan amount, pawnbrokers try to evade the repayment so that the interest amount accumulates. In many cases, residents end up losing their precious items, which, in some cases, are 50 times the value of the loan taken.

When gold sellers become pawnbrokers

In Sharjah's central gold market, middlemen can be seen calling gold sellers to pawn their jewellery items instead of selling them.

Customers need to give their phone numbers, a copy of their Emirates ID and, of course, a precious item for getting a loan.

In exchange for the pawned item, customers are given a business card with a number.

Suicide only way out?

KT's investigation has revealed that those who pawn their passports are forced to submit two post-dated cheques - one for the amount taken and another blank. Customers are charged a 40 per cent interest rate and they are given two to three months to repay the loan along with the interest. The interest amount adds up for every month of delay till it becomes almost double the amount taken - and even more in some cases.

Pawnbrokers threaten to encash the blank cheque for the amount, which then becomes a case of financial fraud for the borrower. People have been reported to have committed suicide as a result.

A pawnbroker responds

Norman R., an owner of a jewellery shop in Sharjah, said: "We sell and buy gold. Some people approach us to loan them money against their jewellery. We take the jewellery, for which we issue them a receipt. We charge 10 per cent of the value of the item as interest and ask customers to pay the interest on a monthly basis.

"If they fail to pay the interest and the accumulated value reaches the value of the gold, we notify the customers to clear the loan along with the interest or leave their jewellery to us, which we then sell."

Police unaware of practice

An official from the Criminal Investigation Department (CID) of the Sharjah Police told KT that they have not received any complaints of people getting trapped in this fashion. Terming the practice as illegal, he said: "If we receive three complaints about this practice, we will form a team to investigate it.

"Moneylenders have no right to withhold anyone's passport. The borrower can lodge a complaint against the moneylender and we will retrieve the passport for him. The moneylender can, in turn, lodge a complaint against the borrower if he fails to repay a loan."

'Gold sellers can't be pawnbrokers'

An official from the Consumer Protection Section of the Sharjah Economic Development Department (SEDD) said gold shops are licensed only to buy and sell gold. "They aren't allowed to provide pawning services," the official affirmed.
'Almost got divorced for pawning gold'

Gada Maher

I pawned my jewellery worth Dh50,000 for a loan of Dh20,000 to help my uncle cover a bounced cheque. I did this without informing my husband. My uncle raised the loan amount within three months and I took it back to the shop, where I was told that the person who loaned me the amount was in India. I called his number in India and some people answered in Hindi, which I don't understand. I had to tell my husband about the pawned gold and he got very angry and almost divorced me. I couldn't go to the police as I had no evidence.

'Lost gold worth Dh70,000 for a Dh27,000 loan'

Prabhakar Avula

I needed Dh27,000 and did not have time for banking formalities as I needed the cash urgently due to a family emergency. I went to the Sharjah Central Souq and met with a middleman, who took me to a small jewellery shop. The jewellery shop staff took my ID and telephone number and asked me to pawn my wife's jewellery worth Dh70,000. I took the money and promised to return the money in a month. Unfortunately, I couldn't pay back the amount in a month's time. I went to the shop after two months, where I was asked to bring the middleman who took me there as the staff said they didn't know me. I called the middleman twice, who promised to meet me at the souq, but didn't turn up. I tried a third time, but his phone was switched off and has been so ever since. I cannot go to the police as I don't have any evidence that I took the money from the jewellery shop.

'Lost gold due to sudden revise in interest rate'

Aadhiyaa K.

I went to a shopping centre in Rolla and pawned jewellery worth Dh18,000 for a loan of Dh10,000. I went to the shop after a month, where I was told that I would not get my gold back as the interest rate had suddenly been hiked and the principal amount and its interest exceeded the value of the gold. I couldn't do anything as all I had against the shop was a business card.

Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.