[Singapore] THE first set of new borrowing rules for Singapore licensed moneylenders will come into effect on Thursday, the Ministry of Law said on Wednesday.
Loans from moneylenders will now be subject to the following caps:
• The upfront administrative fee must not exceed 10 per cent of the loan principal;
• Interest cannot be more than 4 per cent per month;
• Late interest of not more than 4 per cent per month;
• Late fee of no more than S$60 per month; and
• Total borrowing cost must not be more than 100 per cent of the loan principal.
Previously, there were no limits on interest and late interest rates for borrowers earning more than S$30,000 annually. There was also no cap on the total borrowing costs for moneylending loans. These caps will not apply to loans granted to businesses which have been registered for at least two years before the grant of the loan. These new controls follow recommendations made in May by a 15-member advisory committee on moneylending.
More recommendations should be implemented in time. These include allowing borrowers who earn at least S$20,000 a year to take up unsecured loans that is maxed out at six times their monthly salary. Previously, the borrowing caps were based on different salary tiers. Those earning less than S$20,000 a year will continue to be subject to the existing cap of S$3,000.
A credit bureau for moneylenders will be set up, to allow such lenders to assess the credit risk of borrowers.
“The controls on borrowing costs will offer borrowers more protection by ensuring that they are not subject to exorbitant interest rates and fees, while preserving their access to credit by allowing the industry to remain commercially viable,” said Manu Bhaskaran, chairman of the committee, in a press statement.
Kuo How Nam, a member of the committee and president of Credit Counselling Singapore, added that the cap on the borrowing costs will help to ensure that debts do not spiral out of control.
Source: Business Times