New BoT rules shine light on cost fairness
published : 7 Jan 2020 at 14:50
writer: Somruedi Banchongduang
The Bank of Thailand is requiring financial institutions to adjust prepayment charges for small and medium-sized enterprise (SME) and personal loans, and late-payment fees for SME, personal and mortgage loans based on actual costs, with immediate effect.
Replacement fees for ATM and debit cards and codes will also be waived, but financial institutions are still allowed to charge such fees in the event of high costs if the fee is charged appropriately, said central bank governor Veerathai Santiprabhob.
The measures are aimed at establishing a fairer fee structure to better reflect actual costs, reducing affordability risk and alleviating consumer and SME financial burdens.
Under the new rules, prepayment charges for SME and personal loans are calculated based on the outstanding balance, rather than the loan amount as practised previously.
Financial institutions are also required to set a waiver period for the prepayment charges of the loans.
“Prepayment charges that are not too high allow people to pick operators offering the best [loan] deals, intensify competition in the market and trigger the refinancing market in Thailand,” Mr Veerathai said.
Late-payment fees for mortgage, SME and personal loans will be charged based on the principal component of the instalment due, he said. Lenders earlier charged such fees based on the outstanding balance.
The central bank is demanding that financial institutions set a grace period in the event that borrowers are unable to make payments on the due date because of a force majeure clause.
Furthermore, financial institutiuons must refund annual ATM and debit card fees on a pro rata basis in the event of cancellation without any request by customers, Mr Veerathai said.