When you are in need of money urgently, what can you do? One helpful avenue for sorting out financial problems in Singapore is licensed money lenders.
However, the moneylending sector is made up of illegal lenders called loan sharks and legal money lenders. In Singapore, the Moneylenders Act plays a critical role in providing a set of rules and regulations for licensed money lenders that helps mitigate risks for borrowers.
In this article, you will learn about the relationship between the money lenders act, money lenders, and borrowers. Before you apply for a loan, knowing more about the money lenders act in Singapore is essential.
Let’s get started.
What Is The Money Lenders Act In Singapore?
To understand the rules of legal moneylending, we first need to understand the Money Lenders Act in Singapore.
The money lenders act is a set of regulations that protects borrowers from unscrupulous moneylending practices in Singapore. The Act gives guidelines on the moneylending process –from interest rates, money lenders’ caveats, permitted fees, and rules on operations.
Any money lender that contravenes the guidelines is committing an offence and may face jail time, revocation of a license, or a fine.
Responsibilities Of The Registry Of Moneylenders
The Registry of Moneylenders is in charge of enforcing the Moneylenders Act. Here are some of its duties under the Moneylenders Act.
Compliance
As per the money lenders act in Singapore, a money lender must fulfil specific requirements before obtaining a moneylending license.
Any company applying for a moneylending license in Singapore must show proof that it has adequate resources such as management systems to ensure they can conduct ethical business. It must also demonstrate its ability to comply with all necessary legal obligations.
The Registry of Moneylenders ensures compliance is met.
Monitoring
The Registry of Moneylenders handles complaints from borrowers regarding unfair lending practices by licensed money lenders. It also monitors money lenders’ activities, including credit practices.
Renewal Of License
A moneylending license is granted for one year. It needs to be renewed one month before its expiry date. The Registry has the power to approve or decline a renewal.
The Registry of Moneylenders reviews a money lender’s operations before it renews a money lender’s license. For a money lender’s license to be renewed, it must not have violated any rules or have allegations made against it.
If a money lender decides not to renew its license, it should inform the Registry of its intention one month before the license expires.
Revocation Of A Moneylending License In Singapore
The Registry of Moneylenders can revoke a money lender’s license if the latter violates any of the regulations in the Moneylenders Act. Alternatively, the Registry can impose fines where necessary.
Requirements For Money Lenders When Granting A Loan
- The Money Lenders Act requires money lenders to explain the terms of your loan in a language you understand before the money lender starts lending you money.
- A licensed money lender must also present you with a complete loan contract that indicates the loan terms clearly in writing for you to sign
- When granting you the loan, a legal money lender must also send you a cautionary statement for the loan transaction.
- The money lender must issue a receipt for every repayment you make towards the loan.
- Your money lender should also provide you with a statement of accounts every six months in July or January. The statement should include details such as the accrued interest, payments you made during the loan period, and the outstanding balance on your loan, among others.
Debt Collection
The Moneylenders Act requires money lenders to appoint a reputable debt collection agency to collect debts from overdue accounts. Licensed debt collectors must follow the code of ethcics set out by the Credit Collection Association of Singapore.
The appointed debt collection agency must not commit prohibited practices such as harassing borrowers, vandalism, or making threats during debt collection.
How Much Borrowers Can Get From Money Lenders
There are two types of loans you can apply for from money lenders – secured and unsecured loans. The amounts you can borrow depend on several factors, including the collateral, your citizenship, and your annual income.
You can borrow any amount for secured loans if the money lender accepts the loan request. A secured loan involves the pledging of an asset as security for the loan.
However, it is worth noting that if you default on a secured loan, the money lender could confiscate the asset you offered as collateral for the loan to recover its money.
For unsecured loans, the amount or limit depends on your citizenship and your annual income.
If you are a Singaporean or permanent resident (PR) and your yearly income is less than $20,000, your loan limit is $3,000. If you are a Singaporean or PR earning more than $20,000 annually, you can borrow as much as six times your monthly income.
For foreigners, the loan limit is $500 if you earn less than $10,000 annually. If you make between $10,000 to $20,000 annually, you can borrow as much as $3,000; and up to six times your monthly income if you earn more than $20,000 per year.
What A Money Lender Can Do If You Can’t Pay The Loan
The money lenders act regulates what a licensed lender can do if you cannot pay your debt. The licensed money lender must respect the integrity, privacy, and confidentiality of borrowers at all times.
A legal money lender is allowed to take the following actions to recover its money:
- Send you a demand letter
- Contact you through messages or phone calls at reasonable times of the day
- Visit your home to deliver the demand letter or your workplace if you are not at home
- Take legal action against you
What A Licensed Money Lender Cannot Do
Different money lenders will use different avenues to collect a debt if you do not repay your loan. If you have not repaid the debt and do not comply with the money lenders, it may try a different approach to recover the money.
However, there are limitations to how far licensed money lenders can go. Here’s what a licensed money lender in Singapore cannot do when collecting debts.
Threaten, Harass, Or Intimidate
Any harassment, intimidation, or threat is a criminal offence under the penal code.
Whether verbal or non-verbal, a legal money lender attempting to collect its money must not insult or threaten to cause personal injury or property damage to you or your loved ones.
Stalking
This refers to any attempt to intimidate or pressure you to pay a debt. It may take different forms, such as consistently following or tracking your movements or those of your loved ones. It may also involve going to places where you frequently go.
Cause Personal Injury
No legal money lender should cause you bodily harm or affect your physical integrity when collecting its money from you.
Causing physical harm is a serious offence punishable by law and may result in a fine, jail time, or both.
Vandalise Property
A money lender that hangs a banner or notice on your property that causes you embarrassment, is committing a criminal offence and liable to a fine of $1,000.
Damage Or Confiscate Property
A legal money lender in Singapore that wreaks minor damage to your property when attempting to collect a debt may face jail time. Under the Penal Code, it is an offence to damage someone’s property.
If a money lender wants to seize your property, it must first get a Writ of Seizure and Sale from a Singapore Court of Law.
Engage In Unlawful Assembly
Any group of at least three people who confront you and attempt to intimidate you into paying a debt is guilty of the offence of unlawful assembly.
Such an act amounts to harassment or intimidation, even if it is not aggressive.
Rules And Regulations For Money Lenders
The money lenders act outlines regulations that money lenders must abide by. It is an offence to break any of the regulations. A money lender that violates the Act may have its license revoked, or be fined or jailed.
Let’s look at the rules that legal money lenders must adhere to under the Moneylenders Act.
Interest Rate
A money lender cannot charge interest of more than 4% per month on loans or payments that are made late.
Loan Caps
A licensed money lender cannot exceed the aforementioned stipulated loan caps when granting loans to Singaporeans, PRs, or foreigners.
Borrower Requirements
A money lender should not give a loan to a person who is below 21 years old. The money lender must also verify the borrower’s employment status and ability to repay the loan.
Collection Practices
A money lender is not allowed to threaten, intimidate, or harass a borrower while recovering a debt. A money lender is also prohibited from seizing assets or personal property to repay a loan.
Promotion Of Loans
A money lender is prohibited from promoting loans to the public through unsolicited calls, text messages, emails, or flyers. It can only advertise on print or online business and consumer directories, its website, and at its office premises.
Be Aware Of What The Money Lenders Act Entails
The Moneylenders Act is an essential component of the moneylending process. It ensures awareness, transparency, and fairness in the moneylending business.
All legal money lenders and borrowers in Singapore must observe and understand the Act.
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