SINGAPORE: Saddled with debt and unable to repay their loans, about 20 people come through the doors of Arise2care Community Services each month for help in mediation and repayment. Pastor Jolene Ong, who is the chairman of the organisation, said she sees an equal number of people who have borrowed from licensed and illegal moneylenders.
“A lot of those seeking help come in with an annual income of more than S$20,000 but have borrowed from between 10 and 20 licensed moneylenders,” Pastor Ong said.
“They shop around. I have a case currently, her take home pay is only $1,200 a month. But she already owes 10 different moneylenders.”
But a new Bill that will restrict the amount people are able to borrow from licensed moneylenders, aims to put a stop to this, if it’s passed in Parliament.
The Moneylenders (Amendment) Bill, introduced by Senior Minister of State for Law, Indranee Rajah on Monday (Nov 6) aims to improve and professionalise the moneylending industry, by introducing better protection for borrowers and strengthening the regulatory framework surrounding the industry.
The introduction of the amendment bill comes two years after the Government’s acceptance of 12 of 15 recommendations put forward by the Advisory Committee on Moneylending. A series of earlier measures, such as imposing a 4 per cent monthly interest rate on all borrowers, was implemented in May 2015.
AGGREGATE LOAN CAP FOR ALL BORROWERS
Among the measures, the bill proposes to introduce an aggregate loan cap depending on income levels. Borrowers earning less than $20,000 a year will be able to borrow up to $3,000 no matter how many moneylenders they approach.
Those earning above this amount annually may borrow up to six times their monthly income - which means someone earning $48,000 a year could borrow up to $24,000 from money lenders.
The Law Ministry said moneylenders must first obtain credit reports from the Moneylenders Credit Bureau (MLCB), which was set up in 2015. The report will highlight if the borrower has exceeded his or her cap, and this will be a deciding factor as to whether a loan is granted.
The Law Ministry said the measure is to ensure better protection for borrowers by preventing them from over-borrowing. It said money lenders offer small-quantum, high-cost and short-term loans to consumers, who may have exhausted all other forms of credit.
These include bank and credit card loans. As a result, they may not be able to assess loan terms objectively, the Ministry said.
The Bill will also require money lenders to ensure details of the borrower are kept confidential.
STRICTER REGULATION SURROUNDING STAFF AND SHAREHOLDER CHECKS
Other measures to strengthen regulation for the industry include enhancing the Registrar’s powers when it comes to the involvement of people with questionable character.
For example, moneylending companies will need to get the Registrar’s approval before bringing on board a substantial shareholder or when increasing his or her substantial shareholdings. Approval is also needed before the company can employ any assistants.
The Ministry said the Registrar will have the authority to cancel any approvals for staff or substantial shareholder “in order to keep unsavoury characters out of the moneylending industry”.
INTRODUCING MORE TRANSPARENCY AND ACCOUNTABILITY
As part of measures to professionalise the industry, the Law Ministry said after the Bill is passed, money lenders would have to incorporate as companies, and to submit audited accounts to the Registry of Moneylenders each year.
It said two thirds of some 160 moneylending firms have registered as companies. The rest are still functioning under sole proprietorship or partnerships. The aim is to have all registered in the fourth quarter of 2018.
GOOD MEASURES TO PROTECT MONEYLENDERS: STAKEHOLDERS
Vice President of the Moneylenders Association of Singapore, Kenny Ng, welcomed the proposed changes, as he said the loan cap would also protect moneylenders.
He referred to a study commissioned for the purpose of helping the Advisory Committee on its recommendations.
Mr Ng said as much as 10 per cent of debts are written off in the industry each year, although the figure varies with each company.
“I encountered a case through my own company where the borrower came in without any loans,” Mr Ng said.
“He took a loan and went off. When the time came for repayment, he said he was unable to pay. And when we checked his credit records, he had gone on to take five to six other loans after that.”
“So with the 6-month income cap, he can’t do that.”
But Mr Ng said he hopes the imposition of the 6-month income loan cap will be implemented gradually. This would allow companies to be able to recoup payments from existing loans in which borrowers may have already over-extended themselves.
While the cap will stop people from over-extending their borrowing habits, Pastor Ong said authorities will also need to look out for borrowers who turn to loansharks if they are now unable to access licensed moneylenders.
“A particular group I am worried about is gambling addicts. They will look high and low just to get the money to recoup their losses. This is the vulnerable group,” she said.
Pastor Ong said authorities need to better educate the public on the consequences of borrowing from unlicensed moneylenders.
This includes better information to the public on what licensed moneylenders are allowed and prohibited from doing, including unscrupulous advertising tactics.
Pastor Ong said many of those seeking help were duped in borrowing from unlicensed moneylenders through professionally-created websites and text messages.