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$lending new rules

hokkien

Alfrescian (Inf)
Asset
SINGAPORE: People who borrow from licensed moneylenders will get more protection under a set of recommendations put forward by an advisory committee. The Government has accepted the majority of these recommendations, and will implement them progressively from July this year.

To protect borrowers, caps will be placed on interest rates.

Currently, there is no cap on interest and late interest rates for borrowers who earn more than S$30,000 annually. Moneylenders can also charge the borrower additional fees when, for example, GIRO repayments are unsuccessful or if dishonoured cheques are issued.

There is also currently no cap on the total borrowing costs for moneylending loans.

When the new measures kick in, moneylenders will be restricted to maximum rates - for example, they cannot charge interest of more than 4 per cent per month, and this has to be on a reducing balance basis. If the borrower is late in his repayments, moneylenders can charge a late interest - but this also must not exceed more than 4 per cent.

In addition, the total borrowing cost will not exceed 100 per cent of the principal loan sum - which will prevent debts from spiraling out of control.

Chairman of the Advisory Committee Manu Bhaskaran said data has been carefully studied to ensure that the industry remains commercially viable - even with the new caps.

A Moneylenders Credit Bureau, which will give moneylenders access to information on borrowers among other things, will also be set up. This will help them get a better sense of risk when deciding to lend.

A total of 15 recommendations were put forward by the committee, and 12 were accepted the Government. The remaining three - which includes allowing moneylenders to advertise in newspapers using strict templates - are still being mulled over.

Minister of Law K Shanmugam told reporters this is because advertising could lead to increased borrowing, which should not be encouraged.


- CNA/ct
 
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