Some small players raise concerns over new rules
SINGAPORE — Small players in the licensed moneylenders industry, long dependent on high interest rates to cover expenses and mitigate the risks of unsecured lending, could face tough times ahead — and even go under — with proposed new rules to regulate the sector.
The small licensed moneylenders TODAY spoke to decried the rules even as the Moneylenders Association of Singapore said the rules are fair.
One licensed moneylender who declined to be named said the new recommendations to control the total borrowing costs on loans will likely force him out of business.
“With the new interest cap and the late interest cap, it’s going to affect our profit; it’s not even going to cover our expenses ... like rentals and staff. We’re not even going to survive. With the amount of bad debts and all that, there isn’t a 100 per cent return rate,” he said.
Another licensed moneylender, who gave his name only as Alvin, said the new rates drive up the risk of unsecured lending. “With unsecured loans, there is no collateral, so anyone can take the money and run and there’s nothing we can do. Of course, if the rates are higher, everyone will be happy,” said Alvin, who has been in the business since 2010 and charges about 25 per cent in interest.
One licensed moneylender, who would only be known as Kenny, said he would have to avoid making loans to “riskier groups” of borrowers. But he added: “Any policy or ruling that will help the industry (and) the borrower at large will benefit everybody. We have to wait and see how it impacts the industry.”
Moneylenders Association of Singapore president David Poh noted the concerns raised by players, but said he found the recommendations to be fair and necessary to protect consumers.
Non-profit organisations who deal with debt counselling, meanwhile, pointed out that these recommendations are a double-edged sword.
Ms Jolene Ong, executive director of The Silver Lining, said the new rules would make conditions of loans more transparent and debts more manageable for low-income borrowers with real financial needs.
However, as licensed moneylenders may react cautiously and avoid extending loads to more irresponsible borrowers, it may force some to turn to loansharks, said Ms Ong.
Agreeing, president of Credit Counselling Singapore Kou How Nam said: “Whenever you restrict credit ... it’s just postponing the day that they will turn to a loanshark.”
Asked if the lower interest rates would encourage more borrowers, Mr Kou said: “Borrowing is never a matter of price; it’s a matter of affordability and repayment capability. ... the rates in fact need to be at this level, not only to make sure the loan is viable but also to some extent for a bit of deterrence to borrowers.”
Alvin added he hoped for future changes to protect moneylenders. “Customers may complain moneylenders harass them, but we are quite helpless. We are actually on the losing end. I hope the Government can help and at least step in when borrowers owe us.” ADDITIONAL REPORTING BY HOLLY MATTHEWS
