Money Lenders Regulations
The fast-paced financial industry is Singapore has brought about several new changes to the Moneylending Industry here and introducing new money lenders regulations that is both benefiting to money lenders and borrowers.
Hearing from public outcry, the Ministry of Law introduced new loan interest rate caps. This ruling caps the interest rate of loans issued by lenders to be at 4 per cent monthly. This indirectly borrowers from over-borrowing and at the same time the borrowing cost that a moneylender can impost is now capped at 100 per cent of the loan principal.
Not only extending to locals, foreigners are also better protected now. An aggregate loan cap of $1,500 across money lenders is applied to foreigners earning less than $10,000 annually.
However, even with this ruling to protect borrowers, foreign domestic workers (FDW) are now lured into the borrowing game and think of it was quick and easy money. Some money lenders exploit the situation and charge the 4% on top of late repayment fees of $60 monthly. This amount of total repayment does not help FDW as they are unable to maintain their loans and lead to stealing from employers or even criminal activities.
New Business Models, New Money lenders, New Money Lenders Regulations
Late last year, new moneylending licenses were issued. This is a first in six years as a one-time lifting of the moratorium (imposed in 2012) as part of a pilot scheme in light to the new money lenders showing promise in better protecting borrowers through business-led improvements.
The new business models shows usage of data to assess creditworthiness of potential borrowers, digitizing their business processes to lower cost and provide better lending terms to borrowers.
New Loan Rules
Since Nov 30, 2018, the first phase of the Moneylenders (Amendment) Act 2018 and Moneylenders (Amendment) Rules 2018 kicked in, aggregate loan caps are set to limit the amount borrowers can borrow from all licensed moneylenders combined.
These new loan caps restrict Singapore citizens and permanent residents with an annual income of less than $20,00 to only borrow up to $3,000 from all moneylenders combined.
For foreigners, a lower aggregate loan cap of $1,500 is set to those earning less than $10,000 annually. If they are earning between $10,000 and $20,000 a year, they can borrow up to $3,000. For those who are earning at least $20,000, they can borrow up to six times their monthly income.
A regulatory framework is now implemented, whereby licensed money lenders must obtain a borrower’s credit report from the Money Lenders Credit Bureau (MLCB) before granting any loan. This bureau is a central repository of data on borrowers’ loan and repayment records.
Accurate borrower information must be sent back to the bureau with timely updates when borrowers repay their loans.
Similar to the casino self-exclusion rule, there is now a rule to help borrowers regulate or curb their borrowing behaviour. They can opt for the self-exclusion framework and licensed money lenders are prohibited from lending to any individual.
What’s more for Money Lenders Regulations in 2019
The second phase of implementation is to professionalise the moneylending industry. This requires all licensed money lenders to be incorporated as companies limited by shares with minimum paid-up capital of $100,000 and to submit annual audited accounts to the Registry of Moneylenders.