Monday, April 7, 2008

Debt collectors prey on pyramid scheme victims


By John Ndegwa

When Stephen Mwanzia Muema read a classified advertisement claiming that anybody who had lost money in pyramid schemes could recover their hard earned cash, he felt like his prayers had been answered.

Mwema, 34, who runs a food kiosk in Kawangware, Nairobi, had last year invested Sh10,000 in Development Entrepreneurship Capacity Initiative (Deci), one of the pyramid schemes that swindled unsuspecting Kenyans millions of shillings.

But after 10 months of following up on every turn and twist of the Deci rip-off, he finally saw light at the end of the tunnel.

"I saw a newspaper advertisement saying that people could recover money lost in pyramid schemes and I decided to seek the agency’s help," he says.

The advert that attracted Muema’s attention read in part: "Have you invested your money in pyramid schemes, business community Saccos and they have closed their offices, have failed to pay you, have cheated you with excuses? Stop the stories and excuses! Recover your money now!"

New breed of con artists

Thus when he stepped into an office on Nairobi’s Kenyatta Avenue, Muema was confident that his tribulations were about to end.

But were they? Apparently and as it turned out, Muema was yet again walking into another deceiving trap.

To recover his Sh10,000 he was told that he needed to produce all the Deci receipts, a copy of his national identity card and pay Sh2,000 registration fee.

Because his money was less than the minimum amount of Sh75,000 threshold the agency was recovering, he had to pay a five per cent ‘facilitation’ fee.

In total, Muema was required to pay Sh5,750 upfront before the agency could embark on recovering the Sh10,000 he lost in Deci.

According to the lady who served him, it would take four to six weeks to recover the money after which he would pay a final five per cent fee.

If he recovers his money, Muema would have paid the agency Sh9,500.

Unknown to Muema though, the people who allege they could help him recover his money represent a new breed of con artists operating under the guise of debt collectors.

Though debt collection agencies have existed for years, the new crop of swindlers is operating on the pretext of debt collectors targeting desperate investors who lost their money in pyramid schemes.

According to Mr Peter Wanjau, an accountant at a leading beverages distributor and a former debt collector, the agencies are claiming they can recover money on behalf of those conned by pyramid schemes are in fact former pyramid scheme operators who have turned to debt collectors.

"They have realised that people who lost money in pyramid schemes are desperate to recover their money and are easy targets," he states.

When Shillings & Sense visited the agency that had placed the adverts, a man at the office said they follow up cases for people who lost money in pyramid schemes upon entering a "voluntary agreement" with the distressed party.

"We work with lawyers to file cases on their behalf and wait for the legal process to take course," he explained unconvincingly, adding that their target is usually frozen accounts of pyramid schemes rather than the directors.

On why they charge a registration fee and ask for a percentage against the amount to be recovered instead of recovering the money first and paying themselves from the recovered money, he said: "Ours is a service and even when you go to a lawyer or doctor you must pay a consultation fee."

According to Wanjau, individuals disguising as debt collectors to con gullible people are operating on the basis that there is no law that regulates the practice and conduct of debt collectors.

This has effectively provided room for anybody to set up shop and operate as a debt collector. "This is a business that anybody can engage in" he explains, adding that in fact most are briefcase operators with no professional training.

Traditionally debt collectors have been viewed as ruffians who enjoy harassing, intimidating, threatening, attaching and even auctioning a debtor’s properties.

This has made some people believe that because the government has failed in helping them recover their money from pyramid schemes, debt collectors can use their skills to help them.

But according to Mr Wachira Ndege, the group operations director at Credit Reference Bureau Africa, people need to realise the traditional methods of debt collection no longer work. "Things have changed and being crude does not work," he says.

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