One of the most impactful change would be the loan cap that moneylenders can dish out to borrowers. The current practice allows an individual licensed moneylender has a loan cap to each borrower, however, each borrower can borrow from multiple moneylenders.
The new practise proposed on Monday (Nov 6) in Parliament, was to impose an aggregate loan cap to each individual thus limiting the total amount that the borrower intends to borrow.
For example with the new loan cap in place, a borrower with an annual income of less than $20,000 may borrow up to $3,000 from all licensed moneylenders combine. For individuals with annual income of more than $20,000, they may borrow up to six times their monthly income from all money lenders.
For each borrower, before each loan is issued, it is now mandatory for money lenders to obtain credit reports from the Moneylenders Credit Bureau (MLCB) to check if a borrower has exceeded their loan cap limits.
These reports (50cents per report) are to be obtained online and money lenders have to update the Moneylenders Credit Bureau after each loan is issued.
Regulatory Framework for Moneylenders
A new regulatory framework will be established to allow MLCB to impose rules on money lenders to protect borrower data. This is to improve regulation of the industry.
With new rules, comes new changes in borrowers mentality. Ms Jolene Ong, chairman of Arise2care Community Services, which conducts debt counselling, mentioned that the new changes will prevent people from over-borrowing. However, for those in serial debt, they might just turn to unlicensed money lenders.
Regulation in Moneylenders Company Profile
Moneylenders must get the Registrar’s approval before employing or engaging any assistants. Approval must be sought before anyone can be a major shareholder or to increase shareholdings.
This new move is to allow the Registrar to cancel approvals for loan assistants or shareholders should they deemed as “unsavoury” or those with previous convictions in unlicensed moneylending.
Money lenders will then be required to be incorporated and submit annual audited accounts to the Registry for Moneylenders. This is to professionalise the industry and improve transparency and accountability. More than two-thirds of 160 existing licensed moneylenders have been registered as companies.
Empire Global a True Financing Center
Although the Bill has not been approved yet, with the new slew of upcoming potential changes, the loan and money lenders industry is set for disruption. We at Empire Global is pretty equipped to handle such disruption and are ever ready to serve our customers better.