Illegal money lending activities seems to have another new scheme involved. This came in the form of remittance firms providing cash advances with interest to maids.
Illegal Money Lending activities
Illegal money lending activities was seen in a remittance licensee, Toast Me, which was providing a special form of cash advance with interest to maids. In one contract, the firm charged a maid 10 per cent interest for a loan amount of $700. Only $630, was issued to her after a “first-time fee of $70” was deducted. However, this format of money lending can be considered illegal as it is exploiting a loophole in the regulation systems. As the primary goal of remittance firms is to receive money and transmit it, as compared to lending money, which is the role of licensed moneylenders.
A new prohibition against illegal money lending activities for remittance firms will be in place by Sept 10 to stop loan activities. The new prohibition will not affect existing loans, including restructured and refinancing loans.
The rise in an increasing number of foreigners borrowing from licensed moneylenders, from 7,500 for the entirety of 2016 to 35,000 in just the first half of 2018.
It was mentioned by industry observers that it was unusual for remittance firms to be offering loans as the priority is to receive money for the purpose of transmitting it overseas but noted that some remittance firms might be exploiting the loophole since they are not licensed moneylenders under the oversight of the Ministry of Law.
Loan caps and tighter regulations have been aimed at protecting foreigners who are living and working here in Singapore. However, this has led to some borrowers to turn to unlicensed moneylenders for sources of loans.
The new prohibition notice was issued before the new Payment Services Act comes into force. In the upcoming Act, companies that are offering payment services such as remittance will not be allowed to grant loans to individuals.
The current Payment Systems (Oversight) Act and the Money-changing and Remittance Business Act will both be revoked Payment Systems (Oversight) Act and the Money-changing and Remittance Businesses Act will both be repealed when the new legislation takes effect next year.
Pastor Billy Lee, executive director of Blessed Grace Social Services, was quoted to have received distress calls from maids with multiple debts and had handled 110 instances of such cases who had taken loans from Toast Me. Some had even lost their jobs here due to turning to illegal money lending activities and “Toast’s aggressive collection tactics”. Sending letters of demand addressed to their employers and harassment messages.
He has urged the authority to stop such illegal money lending activities immediately “to prevent Toast me from aggressively advertising their credit facility to foreign domestic helpers who have reached their borrowing cap of $1,500 with the licensed moneylenders”