Written reply to Parliamentary Question on interest rates and late payment fees for loans

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Parliamentary Replies

Date: For Parliament Sitting on 3 April 2024

Name and Constituency of Member of Parliament

Mr He Ting Ru, MP, Sengkang GRC

Question:

To ask the Prime Minister (a) whether there are maximum (i) interest rates for secured and unsecured loans and (ii) late payment fees, that banks and non-bank financial institutions can charge individuals in Singapore; (b) if so, what are such rates and fees respectively; and (c) if not, whether MAS will consider introducing such maximum limits.

Answer by Mr Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Chairman of MAS:

1. Interest rates and fees charged by financial institutions (FIs) on consumer loans are commercial decisions by FIs, which are influenced by market competition, prevailing market interest rates, and the risks and costs of lending.

2. Borrowers should carefully assess loan terms and conditions, including the pricing of the loans to ensure that they can afford the loans.MAS expects FIs to deal fairly with, and disclose key information to their customers about the costs and fees associated with their loans.

3. For credit cards and other unsecured credit facilities, late payment fees and interest charges are the most significant potential charges. MAS requires FIs to disclose these charges clearly and conspicuously in customers' statements, including how they are computed. Where a customer has not paid the prior month's bill in full, the bank is required to provide in the current month's statement a projection of the total amount he would incur, including principal, interest, fees and charges, and the length of time that the customer will take to fully pay off the entire outstanding balance if he only makes the minimum payment and where no new transactions are made.

4. For property loans, FIs must provide borrowers with a fact sheet highlighting the key features of the loan, including possible fees and penalties. FIs must also provide details on the interest rates charged and explain, where applicable, how a borrower's monthly mortgage instalments would change where reference rates vary.

5. More generally, the Association of Banks in Singapore's Code of Consumer Banking Practice specifies when and how banks should communicate to customers relevant information on a broader range of principal terms and conditions, including annual fees, repayment grace periods, and interest rates.

6. Our national financial education programme, MoneySense, has been reminding consumers through its website and social media posts on the responsible use of credit. The main messages are for consumers to spend within their means and to pay down any high interest-bearing debt. MoneySense also regularly educates the public on assessing the affordability of a property as well as how mortgage loans work.

7. With transparent fees and charges, coupled with financial literacy, consumers will be better equipped to make decisions that align with their financial goals and select products that best suit their needs. These measures complement other MAS requirements on FIs to mitigate the risk of consumer over-indebtedness, which we have highlighted in previous Parliamentary Queries.

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