Rules are always changing in the moneylending industry, and it is getting stricter each round. The latest rule, imposes a limit on the amount of licensed moneylenders loan that a person may borrow from. With rules changing and tightening the past two years, learn how the new rules is going to change the industry again.
As the public outcry for tighter control of licensed moneylenders and better protection for borrowers, the Ministry of Law (MinLaw) kicks in the first phrase of the Moneylenders (Amendment) Act 2018 and Moneylenders (Amendment) Rules 2018.
The first phrase of Moneylenders (Amendment) implementation calls for aggregate loan caps to be set to limit the amount borrowers (Singapore citizens, permanent residents and foreigners) can borrow from all licensed moneylender sources.
How new licensed moneylenders loan affects you
The new loan caps permits Singapore citizens and permanent resides with an annual income of less than $20,000 to borrow up to $3,000 only.
Whereas those who earn more than $20,000 a year may borrow up to six times their monthly income.
For foreigners, a lower aggregate loan cap of $1,500 for those who earn less than $10,000 annually. If foreigners are earning between $10,000 and $20,000 a year can borrow up to $3,000. Whereas those who earn at least $20,000 can borrow up to six times their monthly income.
New Regulatory Framework
The Moneylenders Credit Bureau will be implementing a regulatory framework whereby licensed moneylenders must obtain a borrower’s credit report from the bureau before granting any licensed moneylenders loan.
The new rules also allow for a self-exclusion framework that aims to help borrowers regulate their borrowing behavior and partake in debt assistance schemes.
Once an individual has applied for self-exclusion, licensed moneylenders are prohibited from lending to this individual.
In order to strengthen the regulation of licensed moneylenders, the law will now require licensed moneylenders to get the approval of the Registrar of Moneylenders before employing or engaging any assistance in the business. This means the loan officers whom are speaking to potential borrowers are fully qualified and vetted.
Not only employees, anyone that wants to be a substantial shareholder or increase his or her shares in a licensed moneylender, prior approval from the Registrar is needed.
The next phase of implementation will begin in early 2019, which includes professionalising the moneylender industry and requiring all licensed moneylenders to be fully incorporated as companies limited by shares with a minimum paid-up capital of $100,00 and to submit to annual audited accounts to the Registry of Moneylenders.
These new slew of laws are here to stay and will only get stricter. This serves great for both licensed moneylenders and borrowers. Lenders can now have better understanding of borrowers and borrowers will now be able to control their own financial well-being better.