Borrowing money from money lenders in Singapore is a familiar financial tool for many who are cash-strapped in the current economic situation. This comes with a dark side as well, with loan sharks preying on these individuals. Therefore, the onus is on the borrowers to check the legitimacy of the lenders. Click here to view the full list of licensed money lenders in Singapore who are regulated by the Moneylenders Act Singapore.
What is Moneylenders Act Singapore?
The Moneylenders Act Singapore was introduced by the government in 2008 to protect both the borrower and the lender. The Act states specifically who is able to conduct the business of money lending as follows:
Exempted money lender
Someone specifically granted exemption from a money lenders’ license, wholly or partially under section 35 or 36 of the Act. For example, a specific money lender is only allowed to deal with personal loans.
An excluded money lender
These are people, corporate bodies, or registered societies that are permitted to lend money under other written laws. An example would be a pawnbroker, who is licensed under the Pawnbrokers Act 2015, and credit societies under the Co-operative Societies Act (Cap 62).
Those authorized by the license
These refer to authorized money lenders who hold a valid license issued by the Registrar. For example: Elite Investment and Credit Pte Ltd.
Importance of the Act
Since the enactment of the Moneylenders Act Singapore, its main aim was to impose harsher sentences and fines for illegal money lending activities. The Act was introduced to safeguard the interest of the borrower by restricting the loan amounts, annual interest rates, and fees. It also protects the rights of foreign borrowers as well.
Main Contents of the Act
1) Cap on loans
The biggest advantage of the Act is that it has set a limitation to the loan amounts for both Singaporeans and foreigners. Illegal money lenders impose no loan limit to borrowers, which leads to never-ending debt repayments. At present, low-income earners, who earn $20,000 per annum, can only borrow a maximum of $3,000 from licensed money lenders. All others are allowed to borrow up to 6 times their monthly income. Foreigners, on the other hand, can borrow between $1,500 and $3,000, if they earn $10,000 and $20,000 respectively.
2) Importance of Credit Reports
Under the Act, legal money lenders need to review the credit reports and scores of all borrowers prior to approving any application. These reports can be retrieved from the Moneylender’s Credit Bureau. This allows the legal money lender to profile his borrower based on past repayment patterns and habits.
3) Self-exclusion list
This list allows individuals (Singaporeans, foreigners and Permanent Residents) to exclude themselves voluntarily from applying any unsecured personal loans from any licensed money lenders in Singapore. The Moneylenders Credit Bureau (MLCB) will keep track of such applications.
4) Advertisement and marketing limitations
In recent years, foreign domestic workers have been victims to unscrupulous illegal money lenders, who took advantage of their plight and lure them via SMS, Watsapp, messages, etc. In 2019, the government announced new measures imposing restrictions on lending and advertising practices to curb these illegal activities.
5) Responsibilities of the Registrar of Money lenders
The Act calls for the Registrar to screen all individuals entering the money lending business. The Registrar has the power to accept or reject any individual. Potential employees are required to go through a stringent screening process as well. This is to prevent undesirable individuals from entering the industry.
Importance of updating the Act regularly
a) Protect first-time borrowers
It is easy to fall prey to illegitimate money lenders in Singapore as they are very convincing. Always refer back to the registry for confirmation. Being a first-time borrower can be tricky as the online advertisements are very tempting. With regular updates, borrowers are safeguarded against illegal money lenders in Singapore and have better peace of mind.
b) Ensure quality money lenders in the industry
The Registry of money lenders has a strict protocol when registering licensed money lenders in Singapore. They have the power to revoke any license should there be any violation of the Act. They also ensure that only qualified, competent and professional personnel serve the borrowers.
c) Get rid of illegal money lenders
The Act protects borrowers against illegal money lenders in Singapore who are aplenty out there, imposing them as legal money lenders. With the Registrar’s stringent registration requirements, which require a license number, registered business name, and address, it is becoming more difficult for illegal money lenders to penetrate into the legitimate industry.