It’s to prevent snowballing of debts.
Local licensed moneylenders are now prohibited from issuing short-term loans of less than one month, and splitting a loan into smaller amounts to borrowers who are unlikely to keep pace with payment plans.
According to a release by the Registry of Moneylenders, the new guidelines seek to address three practices, the first of which is falsely informing borrowers that they can only be granted only weekly loans under a “new law.” The second practice is splitting a single loan into several smaller component such that a late fee of $60 can be imposed on each component that borrowers do not pay on time. The last is offering short-term loans of less than a month in duration, which borrowers have to repeatedly finance by paying an administrative fee.
The industry regulator now requires moneylenders to inform borrowers of the terms and conditions of the loan, and this includes information on how interest and fees are computed and when these will be charged.
It also emphasized that licensed moneylenders must stop offering loans to borrowers who are unlikely to keep up with repayment plans, leading to a snowballing of debts that are even more difficult to repay.
To warn borrowers of such loans, moneylenders are further required to provide borrowers with a cautionary statement in writing before any loan can be granted. Borrowers who have been given such loans may lodge a formal complaint with the Registry.
“Licensed moneylenders found to be in breach of the Directions will be investigated and dealt with accordingly,” the Registry stated.
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