I am really curious! I never know that BANKS can unilaterally
change the “spread” of their SIBOR loans!!!!!!!!! Isn’t doing so a violation of the agreement that
the bank (e.g. Citibank here) signed with its client?
Feeling strange about
this, I went to look at my signed mortgage loan agreement and it reads:
Year 1: 3M-SIBOR + 0.85%
Year 2: 3M-SIBOR + 0.85%
Year 3 and thereafter:
3M-SIBOR + 0.85%
So, it is clear that
from Year 3 and thereafter, the interest that the bank agreed to charge is
"3M-SIBOR + 0.85%"! (Note that
the "0.85%" is usually referred to the "spread" or "margin").
Are most or all banks mortgage loan agreement written in this way? Then why the
newspaper reported that banks have the right to change this spread??????
Not being sure, I
asked around and somebody with the Citibank SIBOR loan said that theirs look
the same, except that their spread is “0.65%”!
If so, how can Citibank
unilaterally change the spread of “0.65%” to “0.85%” (according to the news)??? There is nothing in the mortgage loan
agreement that states that the bank can change the “0.65%” figure!!!!!!!!!!! Furthermore, the banks such as Citibank are
already protected as SIBOR is already floating!!!!!!!!
My own opinion is that
Citibank's stance cannot stand up to challenge legally, because there is
nothing in the mortgage loan agreement that says that the bank can unilaterally
change that “0.65%” spread (if the said mortgagee's situation is as I described
above)!!!. I believe what Citibank is doing constitutes “unfair practices” in the
Consumer Protection (Fair Trading) Act.
"the Consumer Protection (Fair Trading) Act
states that even if the consumer had entered into a written agreement with such
terms with the hotel (ignorantly or carelessly), such an agreement can be
challenged in court by the consumer suing the hotel on the grounds that it is
an "unfair practice".
One of the "unfair practices" specified in this Act is
"taking advantage of a consumer by including in an agreement terms or
conditions that are harsh, oppressive or excessively one-sided so as to be
unconscionable"."
--------------------------------------------------
Borrowers upset over hike in margin
for Sibor loans
Monday,
Mar 30, 2015
Rachel
Boon
The
Straits Times
MANY
home buyers with loans pegged to the Singapore Interbank Offered Rate (Sibor)
have been hit with higher repayments following the Sibor's increase this year.
That
is to be expected, but some Citibank customers have also found that the margin
or spread - the added percentage banks tack on to the Sibor - has also moved
up.
They
were informed earlier this month that the spread on their Sibor-pegged loans
would increase to 0.85 per cent from the promotional rate they had signed up
with. The change takes effect from April 1.
Citibank
said the spreads range from 0.6 to 0.8 per cent for customers who took up loans
in late 2010 and in 2011.
One
customer said he has been on a three-month Sibor loan since 2011 under a
two-year lock-in package. His spread has risen from 0.7 per cent to 0.85 per
cent.
However,
Citibank said raising the spread has affected only a small number of people.
Mr Peng Chun Hsien, Citibank
Singapore's head of secured finance solutions, also stressed that the "current revision is
only applicable to clients outside the lock-in period".
Another
customer, a Mr Lee, said he has been on a one-month Sibor home loan since 2011.
He
told The Straits Times his spread has risen from 0.65 to 0.85 per cent but he
had thought the spread would stay at 0.65 per cent throughout the loan.
Mr
Peng told The Straits Times:
"The word 'throughout' is a term the industry uses, and refers to the
tenure and period that we are covering."
He
added that affected customers had been given sufficient notice so that the
process is transparent and they can opt to refinance their loans. Mr Peng noted
that the overall rate is still fairly competitive.
Mr
Keff Hui, a broker at Mortgage Supermart Singapore, noted that an 0.85 per cent
spread used to be the market rate but some banks had lowered it to attract
customers.
Another
client on a one-month Sibor said: "Sibor
is already variable and has gone up by 100 per cent year on year. How can the spread be variable too?"
Finance
industry experts say reviewing spreads is standard bank practice, but in
practice, changing the spread during the loan period is uncommon.
The
Straits Times understands that banks such as United Overseas Bank and OCBC Bank
have not increased the spreads. A DBS Bank spokesman said DBS and POSB have not
varied spreads while under an existing agreement with customers. He said an
0.85 per cent spread used to be the market rate but some banks have lowered it
to attract customers.
Customer
Mr Lee said: "I will have to pay $200 to $300 more a month, but the amount
is not significant. It's about how the bank can do this to customers."
Mr
Seah Seng Choon, executive director of the Consumers Association of Singapore,
said: "We are of the view that the banks should justify such rate changes
clearly to the affected consumers. Such changes will not be fair to consumers
if there is no justification to do so."
Citibank
said it undertook "careful consideration of factors including prevailing
market conditions" before making the move.
The
Monetary Authority of Singapore (MAS) said it does not regulate the setting of
interest rates but the banks must provide clear and relevant information on products
and services, said a spokesman, adding that MAS has asked Citibank to review
the customer feedback received.
Mr
Peng said all the terms and conditions have been carefully outlined and that
interest-rate definitions are clearly stated.
He
encouraged affected customers to contact the bank, adding that any decision
they make regarding their loans will not be bound by any penalty or fees.
--------------------------------------------------
--------------------------------------------------
Recourse for consumers over 'unfair
practices'
PUBLISHED
ON MAR 18, 2015
CONSUMERS
do have some legal recourse over unfair practices by businesses ("Case
looks into wedding banquet cancellation fees"; Monday).
Speaker
of Parliament Halimah Yacob cited the case of a couple who had to pay half the
cost of the wedding banquet, despite cancelling their booking a year before the
wedding. This is clearly exorbitant and punitive, which is not allowed by the
law.
If
the hotel wants the couple to pay half of the banquet cost, it must be able to
prove in court that it has suffered such actual damages (amounting to half the
cost).
Since
the cancellation notice was given a year in advance, it is hard to imagine how
the hotel could have suffered a loss of such an amount.
Furthermore,
the Consumer Protection (Fair Trading) Act states that even if the consumer had
entered into a written agreement with such terms with the hotel (ignorantly or
carelessly), such an agreement can be challenged in court by the consumer suing
the hotel on the grounds that it is an "unfair practice".
One
of the "unfair practices" specified in this Act is "taking
advantage of a consumer by including in an agreement terms or conditions that
are harsh, oppressive or excessively one-sided so as to be
unconscionable".
Tan
Sin Liang
--------------------------------------------------
