Changes to Moneylenders Act to help improve protection for borrowers
The Moneylenders Act has been amended to strengthen the enforcement powers of the Registry of Moneylenders and safeguard borrowers' information from unlicensed moneylenders.
Advertisements by moneylenders in newspapers in Singapore were banned in 2011.
SINGAPORE: Rules governing moneylenders in Singapore are being tightened to further improve protection for borrowers, especially for those in the lower-income group.
The Moneylenders Act has been amended to strengthen the enforcement powers of the Registry of Moneylenders and safeguard borrowers' information from unlicensed moneylenders.
The change means the registry can now engage any person, for example, auxiliary police officers, to help conduct more frequent and thorough enforcement checks on moneylenders.
The amended law makes it a criminal offence to share information on borrowers with unlicensed moneylenders.
It is also an offence for moneylenders to carry on their moneylending business at an unauthorised place of business regardless of when it commenced.
Senior Parliamentary Secretary for Law Sim Ann said changes are also made to the Moneylenders Rules.
The changes include mandating the use of an Effective Interest Rate instead of a Nominal Interest Rate for loans borrowed.
The Effective Interest Rate takes into account the compounding effect of the frequency of the instalments, thus, better reflecting the actual cost of borrowing.
The Silver Lining executive director Jolene Ong said majority of those who borrow money get themselves trapped because they cannot meet the payment schedule.
She said: "Some of the payment schedules could be weekly, some could be monthly, so the majority of them, because of the weekly payment scheme, they default the payment and the interest rate comes in and it snowballs to the amount which is beyond their means."
"In Silver Lining, I do take them to negotiate, on their behalf, with the moneylenders and I am happy to say most of the moneylenders are willing to listen and restructure their loans so that the repayment schedule can be more manageable for these people.
Since the Act was last amended in 2008, the moneylending industry has grown.
Ms Sim said: "We have been monitoring developments and tightened the moneylending regulations last year, through, among others, advertising directions and licence."
Currently there are interest rate caps based on the Nominal Interest Rate of 12 per cent for secured loans and 18 per cent for unsecured loans.
Moneylenders will have to disclose the Effective Interest Rate of their loan packages to borrowers, like what banks do.
Moneylenders Association of Singapore president David Poh said: "Many new players have entered our industry and some of them are charging very high interest and upfront fees with no little or no regard to the borrowers' ability to pay."
Meanwhile, three fees which moneylenders currently charge are removed.
They include fees for the acceptance or renewal of a revolving credit loan, a fee for accepting the loan application, and a fee for payment not being made by the electronic funds transfer.
Ms Sim said: "These fees are typically charged upfront by moneylenders. These fees make the cost of borrowing less transparent, and make it harder for the borrower to compare loan packages. The fees also increase borrowing costs. "
The rules will affect nearly 243 moneylenders in Singapore and take effect from the June 1 this year, to give the industry sufficient time to adjust to the changes.
