Insight

Strides towards improved borrower protection and increased regulation in the moneylending industry

Strides towards improved borrower protection and increased regulation in the moneylending industry

Doreen Sim

Doreen Sim

September 24, 2019 12:21 AM

Introduction

The Moneylenders Act was introduced in 2008 to provide protection to vulnerable borrowers who are susceptible to exploitation by moneylenders. The latest step in this effort is through the implementation of the Moneylenders (Amendment) Act 2018 (the Moneylenders Amendment Act) which introduces changes aimed at:

  1. giving better protection to borrowers;
  2. strengthening the regulation of moneylenders; and
  3. professionalising the moneylending industry.

The changes will be implemented in two phases with the first phase of the amendments becoming effective as of 30 November 2018 – these changes are mainly targeted at meeting the objectives in (a) and (b) above. The next phase of the changes (which is focused on professionalising the moneylending industry) is scheduled to occur in the first quarter of 2019.

This article will discuss the main changes introduced by the Moneylenders Amendment Act.

Better Protection for Borrowers

Aggregate Loan Caps

To prevent individual borrowers from over-borrowing, the Moneylenders Act now prescribes aggregate loan caps to set an overall limit on the total amount of unsecured loans that an individual may obtain from all moneylenders combined. The newly introduced caps are as follows:

  1. no more than S$3,000 for a Singapore Citizen or Permanent Resident with an annual income of less than S$20,000;
  2. no more than S$1,500 for a foreigner residing in Singapore with an annual income of less than S$10,000;
  3. no more than S$3,000 for a foreigner residing in Singapore with an annual income of at least S$10,000 and less than S$20,000; and
  4. no more than six times of an individual’s monthly income for all other Singapore Citizens, Permanent Residents and foreigners residing in Singapore.

This is in contrast to the loan caps prescribed under the old regime which only limited the amount of unsecured loans that an individual may borrow from a single moneylender and which did not prevent an individual from taking loans from multiple moneylenders and consequently becoming over-indebted despite the restrictions.

Provision of Information relating to Borrowers

To facilitate the implementation of the new aggregate loan caps, a regulatory framework has been established which requires moneylenders to do the following:

  1. obtain a credit report on the borrower from the Moneylenders Credit Bureau (the MLCB) prior to granting any loan;
  2. submit accurate information relating to the Borrower to the MLCB; and
  3. provide timely updates to the MLCB as and when the borrower repays the loans.

The new framework also requires both the MLCB and licensed moneylenders to strengthen the confidentiality, security and integrity of data pertaining to borrowers.

In addition, a self-exclusion framework has also been introduced to help borrowers regulate their borrowing behaviour and participate in debt assistance schemes. Under this framework, licensed moneylenders are prohibited from making any loans to any individual who has applied for self-exclusion.

The foregoing measures will evidently enable moneylenders to make more informed and responsible lending decisions and consequentially, will afford better protection for borrowers.

Strengthening the Regulation of Moneylenders

Expansion of Registrar’s Powers to Exclude Undesirable Persons

Under the old regime, the Registrar of Moneylenders (the Registrar) had the power to revoke, suspend or refuse to issue or renew a moneylender’s licence if, amongst other grounds, he is not satisfied as regards the qualification, experience or character of an individual applicant or a director, partner or substantial shareholder of a corporate applicant or any person responsible for the management of the moneylending business. With the changes introduced by the Moneylenders Amendment Act, this power has now been expanded to include persons who are currently employed or engaged, or whom a moneylender proposes to employ or engage, to assist in the moneylending business.

Under the old Moneylenders Act, a moneylender had to obtain the Registrar’s approval after a person becomes a substantial shareholder or changes his substantial shareholding. In contrast, pursuant to the Moneylenders Amendment Act, a moneylender is now required to obtain the approval of the Registrar before a person can become a substantial shareholder or change his substantial shareholding.

With the foregoing expansion of the Registrar’s powers, the chances of having undesirable characters entering into the moneylending industry will be reduced.

Prevention of ‘spare licences’

Under the old Moneylenders Act, it was possible for a moneylender to circumvent the regulations by holding ‘spare licences’ which it can use if its original licence is revoked or suspended. Under the new regime, the Registrar can revoke or suspend a licence if a moneylender fails to commence its new business within 6 months upon the issuance of a licence. This will prevent a moneylender who is not actively operating a moneylending business from holding on to a spare licence.

Tightening Requirements on Loan Contracts

The new Moneylenders Act prescribes more mandatory requirements for loan contracts. For example, a moneylender will now be in breach of the Moneylenders Act if the loan contract does not truly specify the late interest rate or fees payable or if the loan contract contravenes regulatory caps on interest, late interest or fees. The Moneylenders Act also provides that if a moneylender breaches the prescribed caps on fees, interest and late interest, the loan contract will not be enforceable and any guarantee or moneys paid out by the moneylender thereunder will not be recoverable in any court of law.

Professionalising the Moneylending Industry

When the second phase of the changes under the Moneylenders Amendment Act comes into force, licensed moneylenders will, amongst other things, be required to:

  1. be incorporated as companies limited by shares with a minimum paid-up capital of S$100,000; and
  2. submit annual audited accounts to the Registrar to improve transparency and accountability.

Conclusion

In essence, the changes implemented or to be implemented under the Moneylenders Amendment Act will provide safer access to unsecured credit by giving better protection to borrowers and regulating and professionalising the moneylending industry.

Related Articles

Blurred Lines


by Andrew Kirby

Where does responsible lending end and unconscionability begin? Australian courts have come to vastly different conclusions. An overview of current case law.

Australian Courts Assess Loan Repayment

Trending Articles

Johnny Depp and Amber Heard: The Best Lawyers Honorees Behind the Litigation


by Gregory Sirico

Best Lawyers takes a look at the recognized legal talent representing Johnny Depp and Amber Heard in their ongoing defamation trial.

Lawyers for Johnny Depp and Amber Heard

The Real Camille: An Interview with Johnny Depp’s Lawyer Camille Vasquez


by Rebecca Blackwell

Camille Vasquez, a young lawyer at Brown Rudnick, sat down with Best Lawyers CEO Phillip Greer to talk about her distinguished career, recently being named partner and what comes next for her.

Camille Vasquez in office

Announcing The Best Lawyers in The United Kingdom™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from the United Kingdom.

The Best Lawyers in The United Kingdom 2023

Announcing The Best Lawyers in France™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from France.

Blue, white and red strips

Education by Trial: Cultivating Legal Expertise in the Courtroom


by Margo Pierce

The intricacies of complex lawsuits require extensive knowledge of the legal precedent. But they also demand a high level of skill in every discipline needed to succeed at trial, such as analyzing technical reports and deposing expert witnesses.

Cultivating Legal Expertise in the Courtroom

Announcing The Best Lawyers in Germany™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Germany.

Black, red and yellow stripes

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

Announcing The Best Lawyers in Belgium™ 2023


by Best Lawyers

The results include an elite field of top lawyers and firms from Belgium.

Black, yellow and red stripes

What If Johnny Depp and Amber Heard Had a Premarital Agreement?


by John M. Goralka

Oh, the gritty details we’re learning from the latest court battle between Johnny Depp and Amber Heard. This unfortunate airing of dirty laundry may have been avoided with a prenup. Should you think about getting one yourself?

What If Johnny Depp & Amber Heard Had Prenup?

Announcing the 2022 Best Lawyers™ in France


by Best Lawyers

The results include an elite field of top lawyers and firms, including our inaugural Best Lawyers: Ones to Watch recipients.

Announcing the 2022 Best Lawyers™ in France

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

We Are Women, We Are Fearless


by Deborah S. Chang and Justin Smulison

Athea Trial Lawyers is a female owned and operated law firm specializing in civil litigation, catastrophic energy, wrongful death and product liability.

Athea Trial Law Female Leadership and Success

Announcing the 2022 Best Lawyers™ in Germany


by Best Lawyers

The results include an elite field of top lawyers and firms, including our inaugural Best Lawyers: Ones to Watch recipients.

Announcing the 2022 Best Lawyers™ in Germany

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

U.K. Introduces Revisions to Right-to-Work Scheme and Immigration Rules


by Gregory Sirico

Right-to-Work Scheme and Immigration Rules in

Famous Songs Unprotected by Copyright Could Mean Royalties for Some


by Michael B. Fein

A guide to navigating copyright claims on famous songs.

Can I Sing "Happy Birthday" in Public?