18. Prohibition of compound interest
Feedback & supportAny contract for the loan of money by a moneylender shall be illegal in so far as it provides, directly or indirectly, for the payment of compound interest, or for the rate or amount of interest to be increased by reason of any default in the payment of sums due under the contract:Provided that provision may be made by any such contract that if default is made in the payment upon the due date of any sum payable to the moneylender under the contract, whether in respect of principal or interest, the moneylender shall be entitled to charge simple interest on that sum from the date of the default until the sum is paid, at a rate not exceeding the rate payable in respect of the principal apart from any default and any interest so charged shall not be reckoned for the purposes of this Act as part of the interest charged in respect of the loan.
moneylender
“moneylender” includes every person whose business is that of moneylending or who carries on or advertises or announces himself or holds himself out in any way as carrying on that business whether or not that person also possesses or earns property or money derived from sources other than the lending of money and whether or not that person carries on the business as a principal or as an agent but does not include —(a)any body corporate, incorporated or empowered by a special Act of Parliament or by any other Act to lend money in accordance with that Act;(b)any society registered under the Cooperative Societies Act;(c)any person bona fide carrying on the business of banking or insurance or bona fide carrying on any business not having for its primary object the lending of money in the course of which and for the purposes whereof he lends money;(d)any pawnbroker licensed under the provisions of any written law in force in Singapore relating to the licensing of pawnbrokers; and(e)any finance company licensed under the Finance Companies Act.
Subsection (1) shall not apply to transactions known as thavannai transactions, between one moneylender and another moneylender, provided that any such transaction is evidenced by a written document duly stamped.
Subsection (1) shall not apply to loans or advances by a moneylender on current account where interest is payable on the daily balances with monthly or more extended rests at a rate not exceeding 15% per annum.