The rules governing moneylending in Singapore will be amended to further improve protection for borrowers.
Acting upon the second reading in the Moneylenders Act, the proposed changes will include mandating the use of the effective interest rate (EIR), as opposed to the nominal interest rates which are currently adhered to.
The EIR will help borrowers easily compare various loan packages and will reflect the actual cost of borrowing over a period of one year.
The amendments will also remove certain fees which moneylenders are allowed to charge borrowers, including the acceptance fee for a loan application, fees for the renewal of a revolving credit loan and penalty fees for any payment not made through electronic funds transfer. It will also remove the exceptions on the limits of the amount of unsecured loans borrowers can acquire.
Moneylenders will also be required to compute and reveal the EIR of their loan packages to borrowers. In addition, coverage of interest rate caps will be extended to a larger group of borrowers, from borrowers who earn less than S$20,000 annually to those earning less than S$30,000 a year.
Singapore’s moneylending industry has grown since the law was last amended in 2008. Sim Ann, Senior Parliamentary Secretary for Law, said they “have been monitoring developments and tightened the moneylending regulations last year, through, amongst others, advertising directions and licensing.”
The amendments to the moneylending rules will affect approximately 243 moneylenders in the country and will take effect from 1 June 2012.
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