THE TRUE COST OF CREDIT TO CONSUMERS IN SINGAPORE

Abstract

Historically, the cost of consumer credit has been presented in many different ways. The classic example is the flat rate, whether add-on or discounted. A survey of the various types of consumer credit available in Singapore highlights the different ways the interest rates are quoted and the discrepancy between quoted rates and true cost of credit. Legislation already exists in countries such as the United States, the United Kingdom, Australia and Canada, which requires the disclosure of true interest rates in the form of an annual percentage rate. Such legislation has been found to increase consumer awareness of annual percentage rates and to stimulate shopping for credit thus encouraging competition and protecting consumers from unscrupulous creditors. With the rising affluence of the Singapore society and the Government's aim to develop Singapore into a major global financial centre, it is timely for Singapore to consider adopting similar legislative reforms to promote "truth-in-lending". Such reforms should be accompanied by consumer education programs.