“Don’t use force”, official committee says on seizure of equipment by finance/leasing firms
View(s):An official committee probing irregularities in the finance and leasing business has proposed banning the use of force in the seizure of equipment for non-payment of dues.
“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,” a public statement from the Central Bank (CB) said on Wednesday.
It said the 3-member committee appointed by CB Governor Prof. W.D. Lakshman has submitted its report to the governor. The committee was asked 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 received from the general public, civil organisations, financial sector associations and other interested parties in the finance business and finance leasing business.
The committee has identified that the activities emanating from 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, certain loopholes in the provisions of the Finance Leasing Act, No. 56 of 2000.
The short-term proposals recommended by the committee are: Prevention of the use of force in the possession 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”; Issuing directions defining the word “Notice” given under Section 39 of the Finance Leasing Act; 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 lease.
The long-term solutions recommended are: Amendments are recommended to the Finance Leasing Act on the following aspects – 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; transfer or assignment of lessee’s rights, and further, need for broader consumer protection in the financial sector.