Tighter rules for moneylenders rolled out to protect borrowers

Interest rates and late fees were capped.

Moneylenders will now have to work under stricter rules, the Ministry of Law revealed today.

Twelve out of fifteen recommendations from the Advisory Committee on Moneylending will be adopted to provide greater protection for borrowers.

The maximum nominal interest rate has been capped at 4% regardless of a borrower's annual income. Moneylenders currently have a 20% maximum effective interest rate per year for borrowers earning less than $30,000 a year, and no interest rate cap for borrowers whose income exceeds $30,000 per annum.

Late fees, which previously had no limits, have been capped at $60 a month, while total borrowing costs will be capped at 100% of the loan principal.

No additional fees will be allowed under the new rules, and the maximum upfront administrative fee has been set at 10% of the loan principal.