LAW ON REGULATION ACTIVITIES OF MONEY LOANS HAS BEEN IMPLEMENTED
Parliament approved the Law on Regulation Activities of Money Loans, and implementation became from 1 March, 2023. The aim of the law is to register and control legal entities engaged in the operation of money loans granted under the collateral lending procedure. It also applies to a citizen who participates in money-lending activities regularly, and for the purpose of making a profit. The Law provides for regulations related to setting the maximum interest rate for loans, paying the loan and its interest, and protecting the rights and legal interests of the client in the operation of money loans.
The Law was defined the following requirements for entities and citizens engaged in money loans;
- the amount of capital (cash) of citizens – for loan activities - and the amount of capital contributed by legal entities, must not be less than MNT10.0 million,
- staff (executive management, managers, and related employees) must have attended training,
- possession of a current bank account for cash loan operations,
- registration as a taxpayer,
- cash register and printing equipment connected to the unified tax system,
- a workplace that meets the requirements and standards for the activity (in order to engage in money loan activities under the collateral lending procedure),
- online registration process, and
- connection to an electronic database;
Regarding the Law, in cases where the capital contribution of a legal entity engaged in money loan activities is MNT100.0 million in provinces (and more than, and MNT300.0 million in the capital), it shall be registered with the Financial Regulation Commission. In other cases, it shall apply to, and request registration with the Governor of the Province, or Ulaanbaatar respectively. Before the Law enters into force, a pawn shop that has entered into an agreement with the competent authority shall be registered with the relevant registration authority (within one year after the Law enters into force.
The Law on the Regulation Activities of Money Loans includes the following detailed regulations related to money loans.
- Unregistered entities shall not engage in money loan activities or not make advertising about money loan activities.
- Registered entities shall set the interest rate at the maximum loan interest rate determined by the Money Loans Policy Council, and work according to the calculation of the amount of loan interest, and the methodology.
- Registered entities shall not pledge items registered with the electronic database containing information on lost items;
- Registered entities shall immediately report suspicious items to the Police.
Registered entities shall deliver the notice of enforcement of the lien to the borrower, and borrowers must pay it within 14 days.
- If requested by the mortgagor, to determine the value of the mortgaged item by an expert before selling it.
- If the entity sells the pledged item, the rest of the income will be paid to the pledgee after deducting the pledge requirement such as.
The implementation of the Law has the following significance;
- empowering legal entities engaged in money loans activities as financial professional participants,
- improve service standards,
- protect the rights of customers,
- prevent citizens from becoming victims of high-interest money laundering,
- prevent crime by reducing the act of taking loans against stolen goods, and
- combating money laundering and the financing of terrorism.
As soon as the Law comes into force, citizens will have the possibility to check whether an entity is registered with the competent authority, when receiving financial services from a legal entity engaged in money loans activities. People will be able to look over the terms of the loan, and interest rates, and minimize any possible risks.