Sat, Mar 28, 2009 - Page 11 News List

Legislature must support marginal borrowers: experts

By Joyce Huang  /  STAFF REPORTER

If the legislature insists on making a drastic cut to the top interest rate for revolving credit, it should also propose supporting measures to meet the needs of disadvantaged borrowers who may be forced to borrow from non-bank lenders with an average 32.5 percent interest rate, pundits said yesterday.

“The legislature should be simultaneously mulling bills to regulate pawn shops, private non-bank money lenders and debt collectors, otherwise it will put these marginal borrowers in an even more vulnerable position,” George Lin (林繼恆), a lawyer with Lin & Partners (恆業法律) and the Bankers Association of ROC (銀行公會), told a public hearing in the legislature yesterday.

Pawn shops currently charge interest rates of more than 40 percent, he said.

The legislature earlier this month passed the first reading of a bill that would cap the interest rate of revolving credit at 12.5 percent, down from the current 20 percent.

Underground lenders would reap the biggest benefit from a new rate cap if the bill completes its second and third readings in the next weeks.

Lin Chien-fu (林建甫), chairman of the Taiwan Competitiveness Forum, said the legislature’s move would reverse the nation’s efforts in financial liberalization and impede market forces.

But in the event that the legislature passes the bill, Lin Chien-fu urged the government to empower a state-run bank to accept loan requests from marginal borrowers who would likely be rejected by other banks. Government revenue should be used to write off potential bad loans, he added.

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