daniel chigunwe
Godknows Hofisi
Business & Law
In this article I look at two of the acts of parliament affecting interest rates on loans. These are the Prescribed Rate of Interest Act (Chapter 8:10) or “PRIA” and the Moneylending and Rates of Interest Act (Chapter 14:14) or “MLRIA”.
Prescribed Rate of Interest Act or “PRIA”
Application
This is an act to provide for the rate of interest payable on certain debts, to provide for the payment of interest on certain judgment debts, and to provide for matters connected with or incidental to the foregoing. Some of the key provisions are explained below.
Prescribed rate if no other interest rate
According to section 4 of the PRIA, if a debt bears interest and the rate at which the interest is to be calculated is not governed by any other law or by an agreement or trade custom or in any other manner, such interest shall be calculated at the prescribed rate, unless a court of law, on the ground of special circumstances relating to that debt, orders otherwise.
Interest on judgment debt
According to section 5 of the PRIA, every judgment debt which would not otherwise bear any interest, shall bear interest at the prescribed rate unless that judgment or order provides otherwise.
Interest on illiquid claims
According to section 6(1), subject to this section and unless otherwise agreed, every debt arising out of an unliquidated claim shall bear interest calculated at the prescribed rate on the amount of the debt from the date when the cause of action arose, whether or not the amount of the debt is fixed by agreement between the parties, by arbitration or by the judgment of a court.
Prescription of rate by the Minister
According to section 7 of the PRIA, the Minister shall prescribe the rate of interest from time to time.
Definition of interest
According to section 2 of Money Lending and Rates of Interest Act or (MLRIA),MLRIA interest means any valuable consideration given or promised for a loan of money, whether such consideration is in cash, in goods, in kind or any other form whatsoever, and includes any charges for discount, commission, expenses, inquiries, fines, foregift, bonus and renewal and any other charges whatsoever not being taxable conveyancing charges or revenue charges.
Maximum rates of interest
According to section 8(1) no lender shall stipulate for, demand or receive from the borrower interest at a rate greater than the prescribed interest rate.
No recovery of excess interest
Section 9 of MLRIA applies. According to section 9(1)(a) and (d) no lender shall, under any contract of the loan of money, obtain a judgment for or recover from the borrower an amount, that exceeds a capital amount which, added to any sum already paid in respect of the capital debt, equals the sum actually advanced to and received by the borrower under the contract plus:
Interest at a rate not exceeding the prescribed rate of interest; and
Any costs which have actually been incurred by the lender in the recovery of his debt or any interest payable thereon and which would be recoverable at law from the borrower.
Requirements in connection with instruments of debt
According to section 12(1) every instrument of debt, other than a mortgage or general covering bond, executed within Zimbabwe, in respect of a loan of money shall separately and distinctly set
forth:
That it is executed for money lent; and-The amount actually paid to the borrower; and-The rate of interest, which is to be charged in respect of the loan.
Lender’s obligation when interest rate exceeds the prescribed rate
According to section 14(1) when the loan is set at a rate above the prescribed interest rate, the lender has to furnish the borrower with the signed loan document which sets out the particulars of all the essential parts of the transaction.
Lender’s obligations at any later date
According to section 15(1), in respect of any loan of money at a rate of interest exceeding the prescribed rate of interest, the lender shall, on written demand being made by the borrower and on payment by the borrower of such sum as may be prescribed, supply to the borrower or to any person named by the borrower in such demand, at any time during the continuance of the contract, a statement signed by the lender or his agent showing:
The amount actually paid to the borrower; and
The rate of interest chargeable and the amount of the interest accrued due and unpaid; and
The amount paid off in respect of the principal and interest; and
The manner in which any amount paid off has been appropriated to principal and interest, respectively.
According to section 15(2)(b), if a lender fails without reasonable excuse to comply with a demand in terms of subsection (1) within one week after he received the demand, so long as his default continues, he shall not be entitled to sue for or recover any sum due under the contract on account either of principal or interest and interest shall not be chargeable in respect of the period of the default.
Conclusion
The charging of interest on loans is an everyday occurrence. It is important to understand the laws thereon.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations) MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He was recently appointed to the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@hofisilaw.com or gohofisi@gmail.com. Visit www//:hofisilaw.com for more articles.
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