Mandatory cooling-off period for loans from licensed moneylenders

© WongPartnership LLP

DISCLAIMER: This update is intended for your general information only. It is not intended to be, nor should it be, regarded as or relied upon as legal advice. Court decisions referred to herein may be subject to further appeal at the time of publication, and subsequent developments in the law, including new legislation, amendments, court decisions or practice directions, may affect the accuracy or relevance of the matters discussed. We are under no duty to update this publication to reflect any such changes in the law. You should consult a qualified legal professional before taking any action or omitting to take action in relation to matters discussed herein.

WongPartnership LLP (UEN: T08LL0003B) is a limited liability law partnership registered in Singapore under the Limited Liability

Partnerships Act 2005.

Mandatory Cooling-off Period for Loans from

Licensed Moneylenders

On 31 August 2026, the Ministry of Law (MinLaw) issued a press release stating that, with effect from 15

September 2026, a mandatory cooling-off period of three business days (excluding Saturdays, Sundays, and public holidays in Singapore) will be imposed on all unsecured loans (other than a business loan)

taken from licensed moneylenders (LMLs). During the cooling-off period, borrowers will be allowed to cancel a loan at reduced cost.

Currently, LMLs are allowed to keep the full loan approval fee, together with accrued interest, if a borrower cancels a loan. Under the mandatory cooling‑off period, the LML will only be allowed to retain a portion of the loan approval fee, up to prescribed limits, if a borrower cancels a loan during the cooling-off period. There will be no interest charged, and the total amount to be repaid by the borrower cannot exceed the principal amount of the loan.

The framework for this cooling-off period was developed by MinLaw, in consultation with the Credit

Association of Singapore, the professional association representing LMLs. It seeks to strike a balance between affording borrowers an opportunity to reconsider their need for credit, which may sometimes be made on impulse, and ensuring that LMLs are still compensated for the work done when granting a loan.

The Registry of Moneylenders (Registry) under MinLaw will continue to work closely with the relevant parties on its smooth implementation.

We highlight below the key features of the framework as set out in the press release.

Key Operative Elements of the Cooling-off Period

The mandatory cooling-off period has the following key operative elements:

(a)

Scope: The mandatory cooling-off period applies to all unsecured loans (other than a business loan) taken from LMLs.

(b)

Duration: The cooling-off period is three business days, excluding Saturdays, Sundays, and public holidays in Singapore.

(c)

Cancellation right: Borrowers will be allowed to cancel a loan at reduced cost during the cooling-off period.

(d)

Interest rule: There will be no interest charged if a borrower cancels a loan during the cooling-off period.

Moneylenders Cooling-off Period

© WongPartnership LLP

DISCLAIMER: This update is intended for your general information only. It is not intended to be, nor should it be, regarded as or relied upon as legal advice. Court decisions referred to herein may be subject to further appeal at the time of publication, and subsequent developments in the law, including new legislation, amendments, court decisions or practice directions, may affect the accuracy or relevance of the matters discussed. We are under no duty to update this publication to reflect any such changes in the law. You should consult a qualified legal professional before taking any action or omitting to take action in relation to matters discussed herein.

WongPartnership LLP (UEN: T08LL0003B) is a limited liability law partnership registered in Singapore under the Limited Liability

Partnerships Act 2005.

(e)

Repayment composition: Where a borrower cancels a loan during the cooling-off period, the total amount to be repaid by the borrower will be: (i) the remaining principal amount of the loan disbursed to the borrower (after deduction of the loan approval fee upfront); and (ii) the portion of the loan approval fee which the LML will be allowed to retain. The total amount to be repaid by the borrower cannot exceed the principal amount of the loan.

(f)

Loan approval fee retention limits: If a borrower cancels a loan during the cooling-off period, the LML will be allowed to retain only a portion of the loan approval fee, up to the following limits:

(i)

For unsecured loans (other than a business loan) with a principal amount of $5,000 or less, the LML may retain a maximum of $50, not exceeding the loan approval fee.

(ii)

For unsecured loans (other than a business loan) with a principal amount of more than

$5,000, the LML may retain a maximum of 3.5% of the principal amount of the loan, not exceeding the loan approval fee.

This helps to cover the overhead and due diligence costs incurred by LMLs when granting a loan.

The mandatory cooling‑off period provides borrowers with a window in which to reconsider a loan taken from an LML. If they choose to cancel, they may do so at a reduced cost comprising only the remaining principal disbursed and a capped portion of the loan approval fee. This represents a change from the current position, under which LMLs are allowed to keep the full loan approval fee, as well as any interest accrued, if a borrower cancels a loan.

Illustration

The Annex to the press release provides the following example. A borrower obtains a loan with a principal amount of $1,000. After a 10% loan approval fee (i.e., $100) is deducted upfront, the borrower receives $900 from the LML. The borrower decides to cancel the loan within the cooling‑off period. The borrower would have to repay up to $950, comprising $900 (the amount that the borrower received) plus

$50 (the maximum amount of the loan approval fee which the LML is allowed to retain). No interest is charged when the borrower cancels the loan during the cooling‑off period. The total amount to be repaid cannot exceed the principal amount of the loan.

Updates to the Professional Service Handbook for LMLs

To further promote the interests of borrowers, the Registry updated the Professional Service Handbook for LMLs in April 2026 to include the following best practices, which LMLs are encouraged to adopt:

(a)

Repayment incentives: Provision of incentives (e.g., discounts/rebates on interest and/or fees)

for on-time repayments or loans settled ahead of schedule.

(b)

Digital touchpoints: Establishment of digital touchpoints to help borrowers better manage their finances (e.g., online portal for borrowers to monitor their loan servicing).

© WongPartnership LLP

DISCLAIMER: This update is intended for your general information only. It is not intended to be, nor should it be, regarded as or relied upon as legal advice. Court decisions referred to herein may be subject to further appeal at the time of publication, and subsequent developments in the law, including new legislation, amendments, court decisions or practice directions, may affect the accuracy or relevance of the matters discussed. We are under no duty to update this publication to reflect any such changes in the law. You should consult a qualified legal professional before taking any action or omitting to take action in relation to matters discussed herein.

WongPartnership LLP (UEN: T08LL0003B) is a limited liability law partnership registered in Singapore under the Limited Liability

Partnerships Act 2005.

(c)

Proactive assistance for distressed borrowers: Implementation of arrangements to proactively assist distressed borrowers by restructuring the loan repayment to one that will suit the borrower’s financial situation and/or referring them to a Social Service Agency for assistance.

If you would like information and/or assistance on the above or any other area of law, you may wish to contact the Partner at WongPartnership whom you normally work with or any of the following Partners:

Elaine CHAN

Co-Head – Financial Services Regulatory

TIAN Sion Yoong

Partner – Financial Services Regulatory

CHAN Jia Hui

Partner – Financial Services Regulatory

WPG MEMBERS AND OFFICES

- contactus@wongpartnership.com

SINGAPORE

-

WongPartnership LLP

12 Marina Boulevard Level 28

Marina Bay Financial Centre Tower 3

Singapore 018982

t +65 6416 8000

f +65 6532 5711/5722

CHINA

-

WongPartnership LLP

Shanghai Representative Office

Unit 1015 Link Square 1 222 Hubin Road

Shanghai 200021, PRC t +86 21 6340 3131

f +86 21 6340 3315

INDONESIA

-

Makes & Partners Law Firm

Menara Batavia, 7th Floor

Jl. KH. Mas Mansyur Kav.

Jakarta 10220, Indonesia t +62 21 574 7181

f +62 21 574 7180

w makeslaw.com

MALAYSIA

-

Cheang & Ariff

Advocates & Solicitors

Loke Mansion 273A, Jalan Medan Tuanku 50300 Kuala Lumpur t +60 3 2691 0803

f +60 3 2693 4475

w cheangariff.com

-

Foong & Partners

Advocates & Solicitors 13-1, Menara 1MK, Kompleks 1 Mont' Kiara

No 1 Jalan Kiara, Mont' Kiara 50480 Kuala Lumpur, Malaysia t +60 3 6419 0822

f +60 3 6419 0823

w foongpartners.com

MIDDLE EAST

-

Al Aidarous Advocates and Legal Consultants

Abdullah Al Mulla Building, Mezzanine Suite 02 39 Hameem Street (side street of Al Murroor Street)

Al Nahyan Camp Area

P.O. Box No. 71284

Abu Dhabi, UAE t +971 2 6439 222

f +971 2 6349 229

w aidarous.com

-

Al Aidarous Advocates and Legal Consultants

Oberoi Centre, 13th Floor, Marasi Drive, Business Bay

P.O. Box No. 33299

Dubai, UAE t +971 4 2828 000

f +971 4 2828 011

PHILIPPINES

-

Gruba Law 27/F 88 Corporate Center 141 Valero St., Salcedo Village

Makati City 1227, Philippines t +63 2 889 6060

f +63 2 889 6066

w grubalaw.com wongpartnership.com