Pornchai Thiraveja, a spokesman for the Ministry of Finance’s Fiscal Policy Office, said the draft bill on supervision of financial service providers – which is yet to clear the public hearing stage – would not fix the interest rates to be collected by the financial companies, but the rate-setting process would be guided by attention to achieving greater harmony across the categories of loans offered.

Pornchai cited as an example that nano-finance providers would be required to set interest rates equal to those currently levied by Pico finance service providers, while hire purchase firms would provide finance at the same rates as those set for leasing loans.

Now, many businesses are free to set interest rates in the loan types without reference to the rates offered for other loan categories.

If any business does not set its interest rates, it must refer to the civil and commerce law.

The draft bill stems from the government’s efforts to protect consumers and to ensure the systematic and efficient supervision of financial service providers, such as those offering hire purchase, leasing and factoring products.

Some of these companies have not fallen under the government’s regulations and officials have been concerned that such operators may have inadequate standards for their operations.

Under the draft bill, a committee to oversee and supervise financial service providers will be set up to promote independence and flexibility.

An anonymous source at a hire purchase business said that hire purchase businesses run by financial institutions or their subsidiaries are supervised by the Bank of Thailand and the Ministry of Finance. The interest rate charged is set at no more than 15 per cent a year, aside from fees and other expenses, if any.

However, those hire purchase businesses operated by non-bank financial institutions have not been subject to any regulations in terms of the interest rates they charge. As such, they lack any supervisory unit, the source said.

Some companies charge management fees at 8-10 per cent, coupled with the 15 per cent interest rate cap as legally set. Therefore, the effective rates taken in combination are higher than the legal requirement. In such circumstances, these companies are seen as having taken advantage of consumers. The Ministry of Finance has been seeking to address this issue.

Chuchat Petaumpai, executive chairman of Muangthai Capital Plc (MTC), said that the draft bill on supervision of financial service providers that are not regulated by the central bank, or the bill on non-bank financial institutions, is expected to come into effect late this year as the latest.

The public hearing stage has not yet included the issue of interest rates taken in combination with fees that leads to an effective rate of more than 15 per cent. Consideration of this would be the responsibility of the nine committee members – representatives of the BOT, the Ministry of Finance and other experts – to be appointed after the bill comes into effect, Chuchat said.

However, he expressed no concern over the issue as, earlier, the BOT had set the rate cap levied on nano-finance loans at 36 per cent and personal loans at 28 per cent.

He expected the to-be-determined rates to result in no impact for MTC.

It has been announced that the coordinator of a group to protect debtor rights plans to file a lawsuit in a civil court alleging that MTC charged interest on loans above the legal limit of 15 per cent.

Chuchat said that he is not troubled by the prospect for such an action, as the law, stipulates that interest rates can be charged at 15 per cent. It also indicates that the rates of service fees, fines and collection fees shall be set as appropriate, but not determining the fixed rates, Chuchat said.