Kua Hui Li v Propser Credit Pte Ltd  SGHC 108
High Court set aside a moneylending contract that charged exorbitant interest.
Prosper Credit made two loans to the plaintiff’s ex-husband. The interest stipulated on the first loan was 791.61% per annum. However, according to the Moneylenders Act, the maximum rate of interest allowed for a secured loan granted to an individual whose annual income is less than $30,000 is 13%. The interest was found to be ‘grossly unfair’. Hence, the Court set aside the loan contract.
Pertinent Points on the Moneylenders Act (Cap 188, 2010 Rev Ed)
1. The Moneylenders Act (MLA) mandates the licensing of lenders engaged in the business of moneylending. Unlicensed moneylending is an offence under S5 punishable under S14.
2. MLA prohibits the business rather than the act of lending money. Friends and family who make the occasional loan with interest therefore need not be licensed as there is no ‘system and continuity about the transactions’ and they are not ‘ready and willing to lend to all and sundry’: Ang Eng Thong v Lee Kiam Hong  SGHC 64.
3. Moneylenders cannot make unsecured loans of more than $3000 to Singaporeans, unless, the borrower’s annual income is at least $20,000, or his net personal assets exceeds $2 million.
THE MONEYLENDERS ACT REGULATES THE BUSINESS AND NOT THE ACT OF MONEYLENDING
4. The maximum effective interest moneylenders can charge individuals whose annual income is less than $30,000 is 13% for secured loans and 20% for unsecured loans. Contravention leaves transactions open to being set aside, revised or altered in Court.
5. Interest rates are decided contractually when licensed moneylenders lend to someone whose annual income is at least $30,000. The rate charged cannot be “excessive” and the Court will compare prevailing interest rates to determine if the rate is excessive.
6. There is no statutory limit on interest between excluded moneylenders and borrowers. Excluded moneylenders include the friend making the occasional loan with interest, employers lending to employees as a benefit of employment, registered credit societies, licensed pawnbrokers and, those who lend solely to corporations, limited liability partnerships and, trustees. Regardless, if the interest is extravagant and out of proportion with the greatest loss provable from breach of the agreement, the interest is regarded as an unenforceable penalty: E C Investment Holding v Ridout Residence and another  2 SLR 232.