Leong Sze Hian
A local bank has been offering unsecured loans to those earning between $20,000 and less than $30,000 per annum.
The ad says that the interest per annum is 10 per cent.
However, the fine print says that the effective interest rate is 17.97, 18.16, 19.57, 19.19 and 18.80 per cent per annum, for loan periods of one to five years, respectively.
After factoring the 3 per cent processing charge and 1 per cent insurance fee, the effective rate for a one-year loan is actually 25.91 per cent.
This is even higher than the 24 per cent charged on credit cards.
Before the regulations were changed to allow banks to offer unsecured credit to those earning between $20,000 and $30,000 this year, the loans that these borrowers could access were from moneylenders and pawn-brokers, which had a cap of 18 per cent per annum on the interest that can be charged.
With interest rates at historical lows now, why are banks allowed to charge such high interest on unsecured credit, without any interest cap?
POSBank has always been regarded as the people’s bank. Practically everyone has had a POSBank account. Therefore, for POSBank to charge what is arguably the highest interest rates for unsecured credit, which is meant for the lower-income and less financially savvy Singaporeans, is something which I feel rather sad about, as we all grew up saving stamps initially and then pocket money with POSBank.
In countries like the United Kingdom, bank advertisements must show the effective interest rate, instead of “hiding” it in the small print, on top of other charges.
It was bad enough some years ago for POSBank to start charging $2 a month for accounts with an average daily balance of less than $500, but to now charge the highest interest for unsecured credit is alarming – and we all thought unsecured credit would help Singaporeans get legal affordable credit instead of having to go to loan sharks!
Maybe we could all go to credit co-operatives like the Telecom Credit Co-operative (www.tcc.org.sg) which does not charge a $2 fee for accounts less than $500.
By the way, I understand that it also pays one of the lowest interest rates for savings accounts, at 0.125 per cent for the first $50,000.
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Legal loansharks!
Wonder if MAS going to do anything about it…..hope this will not be a sequel to the Minibond fiasco.
“The ad says that the interest per annum is 10 per cent.
However, the fine print says that the effective interest rate is 17.97, 18.16, 19.57, 19.19 and 18.80 per cent per annum, for loan periods of one to five years, respectively.”
Could someone elaborate on the math behind it (conversion from ad values to fine print values)? I assume the ad statement is technically true if phrased in a certain way, though misleading.
Here’s my understanding on effective interest rate
Example of car loan:
Loan amount = $10k
Interest per annum = 3%
Loan Period = 3 yrs
Total Interest Payment = (3% x 10k) x 3 yrs = $900
Annual Payment for Loan = (10000+900) / 3 = $3633.33
Effective Interest Rate = Annual Interest / Annual Payment = 300/3633.33 = 8.25%
Be careful you people out there, alot of such loan advertisements are faking alot of hidden clauses which they don’t explain to you clearly. They just want to sign along the dotted line and thats it, you are trapped! The society is getting more and more corporates using alot of lying tactics just to get in business.
I found out that even NTUC Fairprice offer such loans. So does SingPost via GE Money. These loans are predatory given the high interest, late fees,annual fees penalties etc. The GLCs have gotten into the business so the motivation to reinstate the regulations to limit interest rate, repayment period etc is not there.
They are targetted at those in the low income bracket 20-30K and these people are vulnerable to the rising cost of living. While queuing to send a parcel once, I heard one borrower tell the GE Money loan officer that he was borrowing to pay for medical expenses. Yes, medical expense. It has come to this, the govt has allowed the cost of living to rise so much, a segment of the population need to borrow to make ends meet when the hit an emergence such as illness….and the GLCs (DBS, SingPost, Fairprice) happily go into this business for the juicy profits. ….
Is FairPrice a GLC?
Harvey Norman, Besk Denki and Courts also offer instalment plans with “zero” interest but actually the high interest are built into the product cost. Targetted mainly at low income families, these poor chaps are paying a high price for their wants (not neccesarily needs) and digger themselves deeper into the hole they are already in. And when they default payment, the good are consificated, and according to sources, they are re-sold as new again to the next poor sucker on the line.
Same case with the motobike retail trade.
“7) KopitiamApek on August 18th, 2009 3.45 pm
Is FairPrice a GLC?”
what do you think ?? any possibility of substance over form ?? now you tell me.
to #4: am i correct?
Annual interest rate is not simply Annual Interest / Annual Payment. It is the interest rate on a loan or financial product restated from the nominal interest rate as an interest rate with annual compound interest. Compound interest means that the interest will change each time you pay, and that it is not a simple constant sum for all years. I am certain that the bank is not intending to cheat anyone, and the article has confused the interest rate with the annual interest rate. There is no major issue here, save for the fact that it is in small print and thus not immediately noticeable by the everyday consumer.
9) substance over form
you are answering my a question with a question, and the question was not even directed at you?
@ 6) Lucky Tan,
Nice to see you dropping on TOC, and may I add that Sze Hian and yourself have done a lot to enlighten netizens. Hope to see both of you going the extra 10 miles………….at parliament level ?
I agree with the choice of word ” predatory ” to describe NTUC, Singpost loan activities ………… rather similar to loansharks.
“with “zero” interest but actually the high interest are built into the product cost.”
well, at least this is glaringly clear in the product cost. not something to entice in broad bold font size while the hidden higher cost in un-bold fine print.
“you are answering my a question with a question, and the question was not even directed at you?”
does it matter ?
imo, your question & my answer (or non-answer in the form of question) are for the general consumption of anyone who may be interested to know & expand on it. do not expect others to know / follow some artificial grey markers which you may like to impose.
13) clear
/////well, at least this is glaringly clear in the product cost. not something to entice in broad bold font size while the hidden higher cost in un-bold fine print./////////
Please do not be mistaken that I am citing the examples in my post#8 to justify what the banks are doing. Not at all. Fine prints are really a pain in the a**, and when they come in 3 to 4 pages, we just give up reading them. Buit to the low income and illiterate, they do not even stand a chance to read them.
And you have correctly pointed out, the product cost is shown up front, not in small print, nevertheless to low income and illiterate, the seemingly low monthly installment to paid, no down payment required, and instant gratification of having that product (such as the latest umpteen inch flat screen TV that he can ill afford), delivered to his home in 2 days are the real pulling factor. And he may really believe that he is paying no interest. .
Still, the jurisdiction in Singapore is mildly hazy on what constitutes fraudulent advertising. As stated in an eminent text on law, “some terms … must be printed in red, with a bright red hand pointing to them … before they can be considered part of the agreement”. In other words, the law clearly states that terms must be brought to the attention of the offerees.
But what constitutes attention? We all probably have encountered these popups from software like iTunes, Hotmail, Yahoo!, or even Microsoft Word where they have a long list of terms and agreements for you to click “I accept”. Or in a bank where they give you a sheaf of terms for you to acknowlege. How many people actually read these and/or are given the time to read it before it is taken from them by a banking clerk?
Casinos are coming so need to prepare the local banks to loan generously to casinos punters so as to prevent them from patronising illegal loan sharks. This is to subdue the side effects of casinos on our locals.
6) Lucky Tan
I believe you are refering to this NTUC loan
http://www.fairpriceplus.com/cards/debit_card/Personal_Loan.shtm
FairPrice Plus is a collaboration between NTUC FairPrice Co-operative Limited (NTUC FairPrice) and Oversea-Chinese Banking Corporation Limited (OCBC Bank). All banking products and services, unless otherwise stated, are provided by OCBC Bank for FairPrice Plus.
16) [mercenarylitigator
//////How many people actually read these and/or are given the time to read it before it is taken from them by a banking clerk?//////
Maybe we are supposed to use this time proven ancient practice of burning it , mix the ashes in a cup of water and drink it, and we become in the know in an instance.
Agree, Something has to be done with these ridiculous terms and conditions that consumers have to swallow.
But what constitutes attention?
That is truely a good question.
Some signs are so inconspicuous, like HDB carpark signs, when you want to check out if it is free on Sunday, some of these rules are painted across like 20 lots and you have to walk the whole stretch of carpark lots to read the complete sentence of rule like
“Season parking only on Monday to Saturday 7pm to 7am except Public Holidays. Coupon parking Monday to Saturday 7am to 7pm except Public Holidays. Public Holidays season parking only”
And you enter a pte carpark, a typical carpark sign claiming no responsibilty for damage to your car blah blah, is actually subject to legal challenge if they are so lax in their security and, say, allow thugs to reside there, everyready to strip your car bare. But you need to go thru the hassle of the legal process.
Hello folks, if the bank don’t charge high interest then how to give fat pay to their staffs and shareholders. Think 10 times before you borrow. No options!!
19) KopitiamApek:
The thing is, what makes sense to the Higher-Ups in policy-making is absolutely rubbish when it is applied. A perfect analogy is of a man installing a thousand-dollar security system, complete with CCTV and all, to protect the few hundred dollars he hides under his mattress. Security may work, but does it make sense to put it into practice?
And so it is with the banks and companies and anyone else who wishes to hide clauses in their contracts. It is perfectly legal for them to incorporate clauses that they want (the more restrictive the clauses, the fewer people will join them anyway) but as I said in my first post, the law is hazy when it comes to bringing clauses to user attention.
on red cards and black cards and the abusive technique of PAP:
A dean keeps the 26 black cards in a deck of cards and distributes the 26 red cards to the students. His dean offers $100 to anyone, professor or student, who can hand in a red and black pair. The professor and the students, then, have to negotiate. The only limit is that students can’t bargain collectively; they have to make their own deals. Who has the upper hand? If the professor offers you $20 for a card at the beginning of the game, is it better to take it or wait and hope for more?
In this situation, with the variables—the number and whereabouts of the cards—all known, the decision is relatively easy. Because all the deals will eventually be made and no one has the upper hand, it’s a 50/50 transaction. There’s no penalty for waiting to see how the negotiations play out, because they should all play out the same way.
But the dynamics of the game will change if three black cards are missing and instead of 26 students and 26 deals, there will be 26 students and 23 deals. Then the balance of power tips to the person with the black cards; the red-card holder needs to make an earlier deal or run the risk of losing out.
PAP holds the black cards.
PAP loves to destroy some red cards so that it always command more from the resultant cooperation from the people.
Why should you let them do that?
19) KopitiamApek:
Sorry took me awhile, but I just found the case that was the precedent for what you were referring to.
Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163
A notice at the entrance of a car park identified charges and stated that parking was at the owners’ risk. Notices inside the car park displayed the conditions of issue including exclusions for personal injury as well as property damage. The claimant was injured in the car park. He won the case. The judge ruled insufficient attempt made to draw the claimant’s attention to the existence of the clause. The customer is bound by the terms of the contract as long as they are sufficiently brought to his notice beforehand but not otherwise.
23) [mercenarylitigator
Thanks for your effort in searching for the case as a good example.
To add on , I believe that the customer is bound by the terms of the contract as long as they are sufficiently brought to his notice beforehand but not otherwise, – and the terms are reasonable.
An unreasonable term is not binding, but then again due to cost and time, oftentimes the victims just let it go, rather than go thru the legal hassle.
I learned (albeit too late) that StarHub’s HUBClub’s rewards offering Handset upgrade every 12 months applies only to the Principal Mobile Line. But at their OUB Centre outlet, it was printed in huge letters on the walls “Handset upgrade every 12 months”
and the words “applies only to the Principal Mobile Line” is nowhere to be seen. So I found out the truth after 12 months.
(KopitiamApek, i think we are the only two here at present =P)
Actually, all terms, both reasonable and unreasonable, signed on when the contract was settled, will be binding as long as they are brought to the consumer’s attention. It also must be noted that the general term “XXX Company is free to amend these terms and conditions at their own discretion” is equally as binding. Therefore unreasonable terms are binding as well, though they are usually hauled up to court.
Thus you have issues like people being made to pay for bills they never knew existed – they have no choice but to pay first, and then later attempt to sue to recover the money, or charge the company for fraud. But given the prices that people have to pay lawyers, judges, etc for court cases.. anyone willing to pay $2000 to get back $50 from a ‘cheater’ contract?
The ridiculously distorted maps in the ads of condo launches are another way of misleading the buyers. And every condo is surrounded but lush greenery in the artisr’s impressions, never mind it is next to a hideous looking factory, a cemetary or a noisy expressway.
re: 26).
Yes, the condo launches are very amusing.
They always advertise being “stone’s throw away from ____” and I wonder where they get all the stones. Or “minutes from _____” where ‘minutes’ can be a number from 1 to infinity. And those maps that make you think you can walk from Orchard Road to Bukit Timah “Look, it’s only 3 cm!”
There was an article in the Straits Times about how some of these maps even featured MRT stations that didn’t exist yet and wouldn’t be confirmed to exist in those places. Though they must be applauded for being sly enough to evade that legal loophole by stating “Illustrations are for advertisement purposes only and may not be accurate. Drawing not to scale.”
(sarcasm fully intended)
25) [mercenarylitigator]
////( i think we are the only two here at present =P)////
I wouldn’t put my money on that, as there seems to be always those who would pop up when least expect to give some pop shots at me : ) but I get used to it)
Veru true what you wrote. The pain and cost of the legal process holds one back to put right what is wrong. The ” free to amend these terms and conditions at their own discretion” is the ultimate unreasonable clause, IMO, it is as good as signing on a blank sheet of paper and let them fill it up later.
as for “a stone throw” they did not say who is throwing what size of stone,
for them it would most likely be refeing to a tiny minute stone being thrown by Arnold Swazenneger in his prime days.
Thanks to Mr Leong for sharing the concern and highlighting the fine prints.
This reminds me of Mini bon bon fiasco.
Why does POSB wanna do this?
I wonder.
Are legal trained or law undergrads able to give any comment on this fine print in the contract?
I know of a lady who bought her condo and was shocked upon getting her unit to find her windows open to a grand view of a steep slope below the road level.
Equally amazing was that for such a big ticket item, she did not verify what she is going to get.
This was because her unit was on the lower floors, and the condo site was on a lower ground relative to the road, thus the grand view. Not all layman can tell these less than ideal features from a brochuce, and the sales people are not going to kill their chances of closing that sale by telling the potential sucker (oops, I mean buyer).
A nice housing agent was quite surprised at my turning down her offer a very competitvely and attractively priced unit when I told her the reason was it was smack right next to an electrical substation built into the block. By the way, such electrical facilities are bad news to your health, so not too good idea to live next door to it. I could identify the substation visually from outside, but how many buyers can? In fact the agent was not even aware of its existence.
See ? It is Mr Leong and Commenters that detected and highlight the unfair, stealth, unscrupulous, and virulent malpractices in our society. And there are so much examples, some even involving GLCs.
The Question that must ask is why is CASE sleeping ? Why is the Government allowing such practices? Are they not responsible to eradicate malpractices? No Laws to rein in all the unscrupulous businessmen and executives??
patriot
32) patriot
We are left to defend ourselves in this consumers’ jungle.
Are legal trained or law undergrads able to give any comment on this fine print in the contract?
– ref: posts 16, 19, 23, 25 (:
Don’t even need to say this…
Look at how easily the people can apply for credit cards and end up as card slaves?
Profit orientation will result in them seeking profit at all cause, and in the end may turn a blind eye to their social responsibility
This is the latest sale pitch by a major property marketing group in SG:
“Part of the self-regulation by xxxxx include the following:
a0. Every xxxxxx agent will be required to be covered under the Professional Indemnity Insurance (PII) , worth $100,000 each. BOLD move, certainly yes, the premium is expected to cost in the tune of $800,000 to the agents and the company. If all other professionals such as lawyers and doctors are subjected to Professional Indemnity, it is only right that real estate agents are covered as well to protect the interest of consumer and seriously one would want to be considered a professional.”
Is the PII protecting the consumers or the agents?
In my humble opinion, it is termed Professional Indemnity; indemnity referring to immunity in their job. Thus it protects the agents from the consumers. And arguably, these agents aren’t “professionals” like lawyers and doctors. ;)
The radio ads are still on .
When I first heard it on my car radio, I was thinking to myself, I can’t believe what I have just heard !
Regardless if they are pro or not, the PII is not meant to protect the consumers, but the ads are saying just that !!!
KopitiamApek #33:
Yes Sir! Laws of the Jungle applies in 1st World !
And what’s Laws of this Country for ?(not directed at You KopitiamApek)
patriot
39) patriot
I have since learnt (after hitting numerous trees) to have my eyes wide open as a consumer. Beats trying to do damage control after getting fleeced, or complaining about it which is oftentimes no better than talking to trees.
Well, you’d have better chance of getting a response from a tree after you hit it, than a company that has taken your money after you’ve paid it.
I wonder what Mindy Chen has to say about this? HMMM. Maybe I’ll ask next week. ;)
Anyway I thought I might add to this orgy. They say that if you pay regulators peanuts, you get monkeys.
http://www.asiaone.com/Business/Office/Ask/Story/A1Story20090728-157542.html
It’s pretty much the same everywhere, so don’t start telling me that you want to run to some faraway Utopia. Banks, financial institutions, large corporations in general, have an army of lawyers to put funny clauses into every agreement, be it a product, loan, or even a computer game! (I’ve read the Blizzard Entertainment User Agreement though)
If you really want to hire really good regulators who are legally trained, experienced, or simply smarter than the bastards working for the corporations, you better be prepared to pay top dollar for them too. If not, the slimy corporate rats are simply going to pwn your regulators and run circles around them.
So is the only solution an expensive solution? Maybe. But the best news I’ve heard this morning is that courts and judges in general have a conscience when it comes to very obviously “smelly” parties who try to screw around with other people. Sometimes we forget that judges are human too. If they see an obvious case of a corporation bullying a layman, they’ll try their utmost (within legal limits) to favour the layman, so as to not set a precedence.
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32) patriot on August 18th, 2009 6.34 pm
See ? It is Mr Leong and Commenters that detected and highlight the unfair, stealth, unscrupulous, and virulent malpractices in our society. And there are so much examples, some even involving GLCs.
The Question that must ask is why is CASE sleeping ? Why is the Government allowing such practices? Are they not responsible to eradicate malpractices? No Laws to rein in all the unscrupulous businessmen and executives??
patriot
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Its a SHAME that other so-called INTELLECTUALS could not share this with fellow citizens earlier. Where is the Kampung spirit? road ahead need to take Caution never tell others? You die your Parsar?
what progress?
I mean its a shame that only Mr Leong could sacrifice his time for us by writing this article.
I feel so sad.
Majulah.
Hi In My Opine:
Good Evening!
Yes, it is sad, disappointing and unbelieveable.
Do the Judiciary and Minister of Law WORK ON(for) JUSTICE ONLY WHEN THERE IS COMPLAINT. Are they not responsible for coming up with pre-emptive prevention measures ?
Shame for their neglects of duties!
patriot
POSB is a private entity. Goal is to increase the welath of shareholders.
POSB is owned by DBS, which is co-owned by Temasek Holdings.
Higher interest revenue will be good for DBS / Temasek Holdings / CEO of Temasek Holdings.
Why should CASE get involved?
42) XiiAoGeNgEnX
Having a jury will be better in that sense….way better
48) Yamamoto on August 19th, 2009 1.10 pm
Yes I agree that a Jury would, in theory at least, be a pretty decent idea. However, this might present to us some practical problems.
If you have a Jury, WHO ARE THE JURISTS? If you have regular laymen jurists, it’ll be exactly like having laymen regulators. The brilliantly trained and experienced bastard lawyers in the corporations will play hide and seek with your jurists, who absolutely have no idea what’s going on.
If you have a jury that consists of legally and financially trained personnel, where will they come from? They’ll most probably come from the FINANCIAL SECTOR in the first place, and guess who they’ll vote in favour of? ;)
From 1 September 2009, the average daily balance requirement for POSB Current Account will be S$1,500. The fall-below fee remains unchanged at S$2 per month for accounts with average daily balance of less than S$1,500.
Vote with your feet & go to UOB & OCBC or the foreign banks.
POSB/DBS is a lousy bank.