Singapore – As you probably have read in the news about the changes in moneylending rules in Singapore. The slew of changes enforced on 1 Oct 2015, has led to to a change in how moneylenders manage their borrowers. The Insolvency & Public Trustee’s Office (IPTO) in Singapore is a department under the Ministry of Law (MinLaw).
IPTO oversees the administration of individual and corporate insolvencies, the administration of small intestate estates and un-nominated Central Provident Fund (CPF) monies, as well as the licensing and regulation of moneylenders and pawnbrokers.
So there’s IPTO, which assists the Registrar of Moneylenders and the Registrar of Pawnbrokers in licensing and regulating moneylenders and pawnbrokers in Singapore. IPTO also safeguards borrowers should any licensed moneylender breach the Moneylenders Act.
Simplified MinLaw moneylending rules and recommendations
- You are legally obliged to fulfil any loan contract made with a licensed moneylender. So basically, read the fine print and let the loan officer explain the loan conditions to you.
- Think about any current debts and loan obligations such as recurrent fees. Be smart about the contractual terms, and calculate out the late payment fees and interest repayment.
- Always be reminded, that the law requires moneylenders to explain the terms of a loan in a language that is understandable by you. Plus you are to be provided a copy of the loan contract.
- Shop around for different moneylenders that are able to provide you the best loan terms. Not just us at Empire Global, feel free to check out other licensed moneylenders but also check with our loan officers on what we are able to provide.
How much are you allowed to borrow?
- Up to $3,000, if your annual income is less than $20,000;
- Up to 2 months’ income, if your annual income is $20,000 or more but less than $30,000;
- Up to 4 months’ income, if your annual income is $30,000 or more but less than $120,000; and
- Any amount, if your annual income is $120,000 or more.
What are the Interest Rates Moneylenders can charge?
In the past, loans contracted between 1 June 2012 and 30 September 2015, licensed moneylenders are required to compute and disclose the Effective Interest Rate (EIR) of the loan, before the loan is granted. If a borrower’s annual income is less than $30,000, then the interest rate which licensed moneylenders can charge is capped at 20 per cent Effective Interest Rate for unsecured loans.
Visit https://www.mlaw.gov.sg/content/rom to find out how to calculate Effective Interest Rate from 1 June 2012. However if your annual income exceeds $30,000, the interest caps do not apply and is to be agreed upon the moneylender and the borrower.
However with effect from 1 October 2015, the maximum interest rate licensed moneylenders can charge is 4% per month. The interest rate cap applies regardless of a borrower’s income and whether the loan is unsecured or secured. Should a borrower fail to repay the loan, the maximum interest rate is capped at 4%.
What are the fees that moneylenders can charge?
For loans contracted between 1 June 2012 and 30 September 2015, moneylenders are only permitted to charge six types of fees:
- For each occasion of late repayment of principal or interest;
- For each occasion the terms of the loan contract are varied at your request;
- For each dishonoured cheque issued by you;
- For each unsuccessful GIRO deduction from a bank account, as payment to the moneylender;
- For early redemption of the loan or early termination of the contract; and
- Legal costs incurred for the recovery of the loan.
Any other fees are not permitted, and are hence not enforceable by the moneylender.
With effect from 1 October 2015, all moneylenders are only permitted to impose the following charges and expenses:
- a fee not exceeding $60 for each month of late repayment;
- a fee not exceeding 10% of the principal of the loan when a loan is granted; and
- legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan.The total charges imposed by a moneylender on any loan, consisting of interest, late interest, upfront administrative and late fee also cannot exceed an amount equivalent to the principal of the loan.
Summary: After Effects of New Moneylending Rules
Licensed moneylenders are getting a better structure being laid out by MinLaw and hopefully this will lead to a better name for themselves. With the government cracking down hard on unlicensed moneylenders and errant licensed moneylenders, the public at large will better understand the system that in place.
As licensed moneylenders numbers decreases due to either difficulty in adapting to the new moneylending rules, the remaining licensed moneylenders have quickly switched to a new business model to adapt.
Also learn how to identify licensed moneylenders using 7 simple rules that you really apply before borrowing from them. Most importantly of which, one should not borrow from lenders who advertise their services.
Here’s a little comic from IPTO for an easy guide on borrowing wisely from licensed moneylenders.