Taiwan: Banks to Lower Fees on Microcredit Transactions

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Aug 2014
Taiwan, August, 08 2014 - The Financial Supervisory Commission (FSC) announced in writing to reiterate, when customers are applying for relevant business, the charging of processing fees should adopt the principles of reasonability, openness, and transparency. The FSC encourages banks to offer fee discounts on microcredit applications.

During the summer consumer spending season, many people apply for credit lines at banks to reduce financial pressure. The Financial Supervisory Commission (FSC) announced in writing to reiterate, when customers are applying for relevant business, the charging of processing fees should adopt the principles of reasonability, openness, and transparency. The FSC encourages banks to offer fee discounts on microcredit applications. It is understood, that many private banks have already agreed and will lower fees by NT$3,000 at a minimum.

In fact, an aggregation of the Bankers Association of the Republic of China shows, currently of the over 180 types of credit products offered by domestic banks, most charge processing fees between NT$3,000 and NT$6,000. Fees at private banks are high with some banks charge as much as NT$9,000 to NT$10,000. In contrast, products offered by some state-held institutions only require fees of between NT$1,000 to $3,000.

The FSC indicated, in the near term, it hopes banks can offer credit line application fee discounts to the disadvantaged and customer in urgent need of money including those with unstable incomes or frequently needing working capital. Banks should set microcredit standards according to their customer demographics.

The FSC further pointed out, current regulations have not set a standard for microcredit. However, loans less than NT$100,000 can be considered microcredit. Banks should make accommodations according to customer status. In addition, the nature of credit line fees should reflect processing costs. Thus, financial institutions cannot charge monthly fees and must adhere to the principle of one-time charges.

IN addition, according to the requirements of supervisory authorities, all credit line processing fee data for all banks have been aggregated by quarter and published online for consumer reference and comparison. Current regulations stipulate that “zero interest” cannot be used as a marketing tool when processing loans such as microcredit.

At the same time, consumers should pay attention to the loan’s “annual percentage rate of charge (APR)” set forth in the contract when applying. Consumers should be clear on the “total cost burden” represented by the compound interest rate and various fees before assessing personal borrowing power.



Source : Taiwan News
 

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