NLA votes for guarantor, debtor protection bill
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THE NATIONAL Legislative Assembly (NLA) overwhelmingly voted yesterday to push through the guarantor and mortgagor protection bill in the first reading. The bill will offer a safety net to both guarantor and borrower, including putting a ceiling on the to
The assembly cast 182 votes for the bill, two voted against, while five chose to abstain.
Deputy Prime Minister MR Pridiyathorn Devakula told the NLA that the bill would allow businesses that act as guarantors to take legal responsibility for loans as co-debtors.
What’s more, he said, these entities, especially if they are financial institutions or in the business of acting as guarantors, can also enter into a contract that would allow for the debt payment to be deferred.
Pridiyathorn cited the 1997 financial crisis, in which both guarantors and debtors were hit very hard by the baht’s significant devaluation, which more than doubled the value of loans taken overseas.
Hence this bill, he said, would help put a ceiling on the maximum amount a debtor and guarantor will have to pay, and if the guarantor thinks this ceiling is too high, then they can choose not to sign the contract.
Pridiyathorn added that this bill would also allow for two different forms of debt services: first to pay under conditions specified in the contract or second, paying the total amount in a single payment right away.
He said this would benefit the guarantor, though it may not be in line with international practices.
Meanwhile, NLA member Sakthip Krairiksh offered a caveat by saying that specifying the maximum amount of debt plus interest could lead to the creditor increasing the amount specified in the contract, which in turn may not be fair to the guarantor.
He also warned that letting the guarantor pay through two distinct modes was not in line with international norms and could lead to rejection by both local and foreign financial institutions.
