SINGAPORE - The Government has accepted the recommendations of an advisory committee on moneylending that proposed an interest rate cap of 4 per cent a month and a late-payment interest capped at 4 per cent a month, that licensed moneylenders are allowed to charge borrowers.
Twelve of the 15 recommendations of the committee were accepted, while two - to lift the moratorium on the granting of new licenses and to regulate debt collection behaviour - will be reviewed in time, as the industry adapts to the new regulatory changes, said the Ministry of Law in a statement on Friday.
The 15-member panel was brought together by the Law Ministry last June, to review regulations for the industry and recommend improvements after complaints of excessive borrowing and exorbitant interest rates charged by licensed moneylenders. It submitted a total of 15 recommendations, including capping total borrowing costs at 100 per cent of the principal sum of loan and a standardised loan terms and practices for moneylenders.
"We set up this committee to come up with recommendations that would help protect the consumer, the borrower. But at the same time, if you kill off the moneylending industry, then the people who need to borrow won't get access," Mr K Shanmugan, Minister for Law and Foreign Affairs said.
He said the recommendations are centred on how best to balance both.
The committee had proposed a borrowing cap of 6 times the monthly salary of borrowers and a Moneylenders Credit Bureau will be set up to provide a central repository of information on borrowed using moneylenders. It also proposed that moneylenders to be allowed to charge an administrative fee of not more than 10 per cent of the loan amount and a fixed late fee of not more than $60 a month.
The interest rate caps would be the first of a list of proposals recommended by the committee to be rolled out within a month by the Law Ministry.
Mr David Poh, president of Moneylenders' Association of Singapore said about 30 moneylenders attended a briefing by the committee on Friday morning and most of them found the proposal to be "fair and acceptable".