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Sunday, September 15, 2013

240% late interest fee

The Sunday Times
Joyce Lim

When a licensed moneylender tried to get a borrower to pay up a huge debt on an unsecured loan, the judge said no.

District Judge Leslie Chew found the interest rate of 72 per cent per annum charged by Unilink Credit to be excessive and ordered it slashed to 24 per cent. He also cut the 240 per cent per annum late interest fee to 24 per cent, saying it was not only excessive but also made the transaction "unconscionable".

He said the late interest was "entirely out of proportion to the actual loss that the plaintiff may prove arising from the borrower's default in payment of the instalments, and is therefore a penalty and unenforceable".

The case between Unilink Credit and borrower Chong Kuek Leong came before the judge after Unilink appealed against the Deputy Registrar's decision to cut both the interest rate and late fee interest rate to 18 per cent per month.

Mr Chong had borrowed $8,000 on 72 per cent interest per annum. It was to be repaid over 10 months with a late interest of 240 per cent per annum. When he defaulted on his payment, Unilink Credit went to the courts.

Lawyer Chia Boon Teck told The Sunday Times: "This judgment should send a chilling signal to lenders that their 'agreements' charging excessive interest rates may not be allowed to stand against a defaulting borrower if the borrower challenges the agreement in court."

Joyce Lim

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