Controls on Costs to Offer Borrowers More Protection Now in Force
30 SEP 2015
30 Sep 2015 Posted in Press releases
- From 1 October 2015, the Ministry of Law (MinLaw) will implement new controls on the cost of borrowing from licensed moneylenders.
- Under the new regulations, loans from moneylenders will be subject to the following caps:
- An upfront administrative fee of not more than 10 per cent of the loan principal;
- Interest of not more than four per cent per month;
- Late interest of not more than four per cent per month;
- Late fee of not more than $60 per month; and
- Total borrowing cost of not more than 100 per cent of the loan principal.
- 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. They will also not apply to loans granted before 1 October 2015.
- The new regulations will require moneylenders to calculate interest on a reducing balance basis.
- These controls are the first of several changes MinLaw is making to strengthen the moneylending regulatory framework, following the Government’s acceptance of 12 recommendations made by the Advisory Committee on Moneylending (“the Committee”) in May this year.
- MinLaw and the Registry of Moneylenders have been working closely with the moneylending industry for the implementation of the borrowing cost controls. The Registry has also engaged in dialogue with a number of moneylenders through the Moneylenders’ Association of Singapore, to address specific queries raised by the industry on the controls.
- Members of the Committee commented on the implementation of these controls. Mr Manu Bhaskaran, Chairman of the Committee, said: “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.”
- “The controls on borrowing costs, in particular the total cap of 100 per cent of the loan principal, will help ensure that debts do not spiral out of control,” said Mr Kuo How Nam, member of the Committee and President of Credit Counselling Singapore.
- On 29 May 2015, the 15-member Advisory Committee on Moneylending made 15 recommendations to strengthen Singapore’s moneylending regulatory framework. These recommendations aim to:
- Protect borrowers, who may have no alternative but to go to licensed moneylenders, by curbing egregious and unfair lending practices; and
- Preserve access to credit by allowing the industry to remain commercially viable so that borrowers are not pushed to unlicensed moneylenders.
- The Government has accepted 12 of the 15 recommendations and will be implementing them progressively starting from 1 October 2015. The remaining three recommendations will be reviewed in time, as the industry adapts to the regulatory changes.
Last updated on 30 Sep 2015