Bangkok – The Bank of Thailand (BOT) is preparing to issue regulations governing car-for-cash schemes, with the purpose of protecting borrowers.
Senior Director of the BOT Financial Institutions Strategy Department, Daranee Saeju, said car-for-cash schemes, where the borrower uses their car as collateral for securing a loan, provide a quick source of liquidity compared to other forms of credit. It’s currently utilized by up to three million borrowers, most of whom do not have a source of regular income, including over 1,000 businesses. While the car-for-cash market amounts to around 200 billion baht, it is yet to be governed by any regulations to prevent unfair agreements, hidden fees and high interest rates.
As a supervisor of the retail credit market, the BOT has prepared measures to regulate the car-for-cash industry. Requirements include a minimum registered capital of 50 million baht for lenders, an annual interest rate cap of 28%, allowing for advance payments to pay off loans ahead of schedule, refunds of profits from credit guarantee sales and calculating late penalties based on the remaining balance.
The aim of the new regulations is to protect the consumer from exorbitant and complex fee structures and to promote fair practices and market competition. The BOT is holding a public forum from September 27th to October 12th through the website www.bot.or.th before announcing the regulations in November this year.
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