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Remittance vouchers the new Illegal moneylending scam

Remittance Vouchers the new Moneylending Loan Scam?

With the hard clamping down of illegal moneylenders and the tightening of moneylending borrowing rules, moneylenders are now starting to feel the pinch. In a new rise of moneylending schemes, one that uses remittance vouchers has caught the attention of Foreign Domestic Workers (FDW).

Remittance Vouchers Scheme

This new remittance vouchers scheme that has been hitting the news targets specifically at FDWs They are the prime targets because of the tightening of licensed moneylending rules which permits foreigners from borrowing over a certain cap. This new loan cap caused a new struggle amongst foreigner workers as they are unable to pay back the money they owed.

Under the new regulations, foreigners earning less than $10,000 a year in Singapore can borrow up to only $1,500 from all licensed moneylenders combined. Even with rising concerns about a sharp increase in maids taking out loans and ending up in debt.

It was revealed in Singapore’s Parliament last November that 28,000 maids borrowed from licensed moneylenders in the first six months of last year. This number is more than double the 12,000 who borrowed in the whole of 2017. In 2016, there were just 1,500 maids who took out such loans.

Since then, foreigners are turning to other moneylending sources and at times turning to illegal moneylenders. Their debt further increases as they start missing their repayments.

The Story of Kata

Kata  Store, a cellphone retailer at Lucky Plaza, sold remittance vouchers which provided maids to remit money and get a loan indirectly.

It works by allowing them to buy remittance vouchers of a certain value, of which they have to pay an upfront fee. They are then required to make high-interest repayments which in one case was paying up 45% more than the initial loan. What’s more is that administrative charges of $2 a day would be imposed if repayments are not met on the due date.

With the remittance vouchers, they will give it to the staff at Brunphil Express. They will then remit the cash back to their hometown.

Kata does not hold a moneylending license and is issuing loans that are disguised as instalment plans to maids who do not understand the consequences. This form of offering is causing people to end up in bigger debts.

There have been cases of foreign workers not being able to pay back loan sharks and ended up being recruited by them as runners. Some would even persuade their friends and colleagues to borrow money from them.

Some of the maids are being pressured to send money home thus leading them to borrow from illegal moneylenders. This has resulted in a slew of foreign worker scams too. Scam operators call and threaten potential domestic workers, harassing their employers making them pay money not owed.

It appears that the new rules have somehow affected foreigners living in Singapore although the loan cap ruling was initially introduced to allow them to avoid over-borrowing.

If you are an employer of a foreign domestic worker, do educate them about the problems of borrowing and they would be repatriated back if they borrowed from unlicensed moneylenders.

Advice on Borrowing

If you are thinking about borrowing, always borrow from a licensed moneylender or licensed financial institution. They undergo stringent checks by the government and ask for financial advice on their offerings. Make comparisons with other lenders and read the fine print. Clarify any questions before you attempt to make the loan.