What are the aims of the Moneylenders (Amendment) Bill 2018?
The Moneylenders (Amendment) Bill 2018 which was passed in Parliament on 8 January 2018 (“the Bill”) has a three-pronged aim: to provide borrowers with better protection; to strengthen the regulation of moneylenders; and to professionalise the moneylending industry. The legislative amendments to the Moneylenders Act (Cap. 188) introduced by the Bill aim to provide borrowers, especially those that fall within the lower-income tier, with adequate protection, and ensuring that they are also able to have reasonable access to licensed moneylenders.
Licensed moneylenders are also held to a higher standard of transparency and accountability to ensure that the rights and personal information of borrowers are well-protected, therefore increasing the credibility of such entities to provide a level of security and service.
Why were amendments through the Bill necessary?
The Advisory Committee on Moneylending (ACML) was convened in June 2014 to comprehensively review the regulatory regime for moneylending with these objectives in mind. The Committee issued its Final Report in May 2015 with 15 recommendations to the Ministry of Law (“Min Law”). MinLaw accepted 12 of the Committee’s 15 recommendations and has worked with the industry and the VWOs to implement them progressively.
The motivation behind the recent amendments were driven by the need to protect the vulnerable groups in society that would require such services. This includes gambling addicts that are often forced into a cyclical pattern of over-borrowing and failure to meet repayment schedules. The National Addiction Management Service (“NAMS”) reported that the number of gambling addicts seeking professional help doubled since 2010.
Another worrying trend that surfaced indicates an increase in the number of credit card and micro-loan debtors experiencing overdues for their repayment period surmounting to 28,493 debtors – from 73,000 (2011) to 101,493 (2015).
What are the new features that Borrowers should be aware of?
- Limit on sum borrowed from multiple moneylenders
Presently, there is a limit on the sum that a person may borrow from a single moneylender. However, the amendments seek to set a limit on the total sum that a person may borrow from all the moneylenders combined: You, the borrower, may borrow up to S$3,000 from all the moneylenders combined if your annual salary is below $20,000, and such a sum should not be more than 6 times of your monthly salary.
This limit is only applicable to Singaporeans and permanent residents.
Such an amendment is to prevent over-borrowing. Nonetheless, it is still worth noting that the number of over-borrowers are minute – less than 2% of the Singaporean borrowers who took up loans between March 2016 and March 2017 have an outstanding balance that exceeds the limit.
- New regulatory regime for the protection of Borrower’s data
A new regulatory regime to protect the confidentiality, security and integrity of borrower data was also introduced. A new part III(A) was added to Clause 18 of the Bill, which sets out the regulatory framework for the Moneylenders Credit Bureau (MLCB) and also contains additional obligations which moneylenders must now adhere to. Launched in March 2016, the MLCB, is a central repository of data on borrowers’ loans and repayment records with licensed moneylenders. It allows licensed moneylenders to assess the creditworthiness of borrowers to deter them from borrowing beyond their means.
- Help rendered to over-borrowers
Voluntary Welfare Organisations (VWOs) such as Credit Counselling Singapore, Silver Lining Community Services and Adullam Life Counselling provide debt restructuring services to borrowers who might have over-stretched themselves. However, each VWO has its own unique format and standard operating procedures.
Nonetheless, the Moneylenders Association of Singapore (MLAS) is developing an official framework, the Moneylenders Debt Restructuring Scheme, to complement existing debt assistance schemes offered by the VWOs. This is likely to be implemented by the end of this year.
What are the new features that Moneylenders should be aware of?
- Exclusion of undesirable persons
The Bill allows the Registrar of Moneylenders to exclude undesirable persons from the moneylending industry. This is done through the imposition of more stringent approval requirements on shareholders and personnel of moneylending businesses.
Specifically, the Registrar is permitted to revoke, suspend, refuse to issue, or refuse to renew a moneylender’s licence if he is not satisfied about the moneylender’s qualification, experience, or character. This is also applicable to a director, partner or substantial shareholder of a corporate applicant, or a person responsible for the management of the money lending business. Clause 7 of the Bill expands the scope of this power to include persons who are presently employed or engaged, or whom a moneylender proposes to employ or engage, to assist in the business of moneylending.
- Incorporation of moneylenders as companies
Moneylenders must be incorporated as companies limited by shares with a minimum paid-up capital of $100,000. Currently, almost 70% of licensed moneylenders have been registered as companies.
- Submission of audited accounts annually
Moneylenders will be required to submit annual audited accounts to the Registrar, regardless of the annual turnover of the moneylender. The Ministry of Law finds that due to the nature of the moneylending business, it is pivotal that moneylenders be subject to independent audit supervision.[1]
- Submission of borrower information and updates to MLCB
Moneylenders will be required to submit accurate borrower information to the MLCB and provide timely updates to the MLCB when borrowers repay their loans.
- Request MLCB for credit reports
Moneylenders will be allowed to request MLCB for credit reports. These reports summarise the credit history of each moneylender.
- Employment of assistants in moneylending business
Moneylenders will be required to obtain the Registrar’s written approval before employing or engaging any assistants in its business of moneylending.
Moneylenders will be required to obtain the Registrar’s approval before the person becomes a substantial shareholder, or before any shareholder increases his substantial shareholding. At present, moneylenders are only required to obtain such an approval as soon as practicable after someone has become a substantial shareholder or changes his substantial shareholding.
- Spare licences disallowed
Moneylenders will be required to commence their new business within 6 months of the issuance of the licence. Failure to do so would allow the Registrar to revoke or suspend the licence. This is to prevent moneylenders from holding “spare licences” – which they can utilise if their original licences are revoked or suspended.
- Offence to enter into loan contracts not in accordance with the law
It will be an offence for a moneylender to enter into any loan contract that does not abide by the legal limits on late fees and interest, or interest rate.
A moneylender who commits such an offence may face a fine of up to $20,000 and/or imprisonment of up to 6 months. Also, the court would not enforce such a loan contract, i.e. money paid out under the contract cannot be recovered.
Moving forward
The Ministry of Law may consider lifting the current suspension in the processing of applications for new moneylender licences. This is to enable certain new but established players into the market in order to spearhead new business models.
The amendments to the moneylenders bill is justifiable in protecting both the borrowers and licensed moneylenders. However, there lies in the problem of shutting out the most vulnerable group of people who need urgent monetary help. Facing a scarcity of options, they might turn to unlicensed moneylenders instead; therefore, straying beyond the protection of the law and be defenceless to the criminality of such illicit syndicates.
There are good intentions in amending the clauses in the bill to better protect borrowers and license moneylenders to ensure a level of sustainability and operability. Be that as it may, there exists a small group in the lowest income bracket that might fall through the gaps even with the intervention of VWOs.
[1] Second Reading Speech by Ms Indranee Rajah, Senior Minister of State for Law and Finance, on Moneylenders (Amendment) Bill, at [24].
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This article is written by Lee Ee Yang from Covenant Chambers LLC and edited by Ong Chin Ngee from the Asian Law Students’ Association.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.