How Updating The Moneylender Act Increases Protection for SG Borrowers
Since its enactment, the government has made numerous amendments in order to provide borrowers additional protection. On May 29, 2015 the final recommendations were released. But exactly what are these changes that have been made and how will this affect the relationship between the moneylender and borrower? Read on to find out.
Set Loan Cap Limits To Protect Borrowers
Simply put, permanent residents and Singapore citizens who have an annual income less than S$20,000 can only borrow an amount of up to S$3,000 from all the lenders combined. For those who earn over S$20,000 annually, they can borrow up to six times equivalent of their monthly income from all moneylenders combined.
On the other hand, foreigners residing in Singapore has a lower limit of S$1,500 for those earning less than S$10,000 a year. However, foreigners earning between S$10,000-S$20,000 annually can borrow up to S$3,000. For those earning a minimum of S$20,000 can borrow six times equivalent of their monthly income. But first, make sure you are aware of the different types of loans and which one you intend to make.
So How Exactly Does This Affect Moneylender Loans?
Let’s have a concrete example- the Foreigner Loan, for instance. In the first half of 2016, 53,000 foreigners, most of them domestic helpers, borrowed from these licensed lenders.
The Ministry of Law released these startling figures that highlighted the alarming situation, which has caused huge problems for employers, employment agencies, and foreign domestic workers (FDWs)
The Ministry of Law in SG used these new measures to cap the possible abuse of low-income foreigners through moneylending. The measures introduced a cap on both the lending amounts and advertisements to vulnerable groups such as FDWs.
The self-exclusion framework give foreign workers an option to bar themselves from taking up loans from all licensed financiers. This is done by applying at the Moneylenders Credit Bureau using their SingPass account.
They could also use a third party like their own employer or employment agency if they don’t have any SingPass account. Bear in mind that small financial institutions cannot issue loans to those who have already opted for self-exclusion.
- Lenders need to obtain a borrower’s credit report from the Moneylenders Credit Bureau before they can grant any loan.
- Financiers must submit accurate information of borrower to the bureau and give timely updates every time the borrower repay their loans.
- New rules include self-exclusion frameworks as well to help borrowers regulate or control their borrowing behaviour. They can also participate in debt assistance schemes that require self-exclusion. In simple terms, self-exclusion is a framework that will stop licensed moneylenders from lending to Singapore citizens, permanent residents and even foreign residents included in the list.
- The law requires licensed moneylenders to acquire approval of the Registrar of Moneylenders prior to engaging or employing assistant/s in their business. This will help prevent unwanted characters from entering the lending industry.
- The Registrar’s approval is also needed for anyone to be a substantial shareholder or increase their shareholdings in a licensed lender.
How Did The New Moneylending Law Updates Help Legalise Moneylenders?
- All moneylenders have to be incorporated as companies.
- They should be limited by shares having a minimum paid-up capital of S$100,000.
- Every year, they are required to submit audited accounts to the Registry of Moneylenders.
What This Means for YOU and ME
So why should anyone care about such changes? These changes are crucial because this will guarantee that borrowers will always have safe access to personal credit.
For First-Time Borrowers
If you are reading this because you are planning to make a loan, you definitely have to know about the changes in money lending law and its effects. Next, be aware of any red flags signifying your lender is possibly illicit. Some of these clues are listed below:
Loan Shark Red Flags
It is common for loan sharks to lend money alongside another business. The methods used may vary greatly. Watch out for the following warning signs:
- They provide zero paperwork or agreement for a loan
- Does not want to give any information about the loan
- Keeping items until they are paid, like cell phones, or cash card
- They take things from you whenever there is late payment
- Continuously adding charges or interest so what you owe them never really goes down
- Using intimidation or coercion of you do not pay
Take note however that not all loan sharks act like this. There are times when loan sharks try to imitate legitimate lenders to gain trust. They may even provide you with a payment book or agreement for you to sign.
At this point, how does one guarantee that they are borrowing from licensed financiers?
Verifying A Moneylender’s Legal Status
Licensed moneylenders (LML) need to be registered with the Ministry of Law in Singapore. Their names have to appear on the list maintained by MinLaw together with their license number as well as their business address. Confirm this in three easy ways:
1. Go to Singapore’s Ministry of Law’s official website. You may click on this link.
2. Download the PDF file and scroll through the list to find your prospective finance company’s name to confirm their authenticity.
3. The PDF file also includes a list of companies whose licenses are currently suspended. Inspect the list to ensure you’re not dealing with an LML that doesn’t have any license to offer unsecured cash loans.
Moneylending is a relatively small part of Singapore’s consumer credit market, less than 1% of overall consumer lending in Singapore. Nevertheless, it is a vital part of the economic structure and all its citizens have the right to access correct and timely information on how to go about lending on legal terms. Thus, it is extremely important to learn about the legal changes in order to protect oneself at all times.