The Bank of Thailand (BOT)’s Notifications on Rules, Procedures, and Conditions Governing Personal Loan Business by Financial Institutions (Sor Nor Sor 14/2560) and Non-Financial Institutions (Sor Nor Sor 15/2560) were published in the Government Gazette earlier this month and will be effective from September 1, 2017. The new laws will repeal two current notifications (Sor Nor Sor 1/2560 and Sor Nor Sor 2/2560) and include additional provisions primarily aimed at protecting consumers and providing a channel for emergency loans, with important considerations outlined below.
Credit Limit, Interest Rates, and Expenses
- The previous laws stipulated that the credit limit provided by financial institutions and personal loan operators (collectively referred to as “operators”) should not exceed five times the average monthly income for the applicant. However, the new notification will impose a new maximum credit limit as follows:
- For a loan applicant with an average monthly income of less than THB 30,000: (a) the maximum credit limit must not exceed 1.5 times their monthly income; and (b) no personal loan credit can be further provided if the applicant has already been granted personal loan credits by three operators. In case of an emergency, the operator can increase the limit temporarily to up to five times the loan applicant’s monthly income, provided this complies with the requirements under the notification.
- For a loan applicant with an average monthly income of THB 30,000 or more, the credit limit must not exceed five times their monthly income.
- The effective rate remains the same at up to 28% per year. Additional specified actual expenses can still be charged to the consumer. However, operator business expenses that will be borne by customers must be reasonable and must not include any general business-as-usual (BAU) expenses, such as those relating to automated debt collection systems, water and electricity charges, or employee salaries.
- Prior notice in writing must be provided to customers within a reasonable time period for any changes to the interest rates, fines, service expenses, or any fees that could adversely impact consumers.
- Operators must not deliberately give any personal loan credit without the consumer requesting or applying for such credit.
- Consumers must be informed about the applicable interest rates, fines, service expenses, and any fees, and such information must be provided in all of the operator’s marketing materials, application forms, and loan agreements.
- The operator must keep consumer information confidential. Disclosure of consumer information requires prior written consent from the consumer, unless the disclosure falls within the prescribed exceptions under the notification, such as to comply with the law or for the purpose of an investigation or court proceeding.
- When approaching new prospective consumers, the operator must provide them the opportunity to refuse any further contact by the operator in respect to the offering of personal loans. The operator must also establish internal processes for collecting and maintaining “do not contact” lists for further inspection/audit by relevant authorities.