In times of financial need, money lending is a beneficial service that allows you to quickly borrow cash in a pinch. But despite its advantages, there is always the risk of falling victim to illegal practices, or worse–loan sharks.
The Moneylenders Act is the main legislation to protect borrowers from exploitative people in the business of moneylending. It sets out rules on operations, interest rates, permitted fees, and process that each lender is expected to follow.
Awareness of this written law may mean the difference between keeping safe or getting scammed, so it’s important to review it and all that it entails.
What is the Moneylenders’ Act?
The act is a set of regulations imposed by the authorities to protect borrowers against unfair lending practices.
Under this act, no person shall carry on any type of money lending business unless he holds a valid license issued by the commissioner, and there is no other written law that covers lending.
A license under this act is required for each branch that carries out credit activities, which means that every branch requires its own license.
Every moneylender must also take reasonable care to determine that the borrower is financially capable of repaying the loan before granting credit or entering into any agreement for a sum of money (regardless of whether such sum is guaranteed, evidenced by a document, or not).
The Role of the Registry of Moneylenders
The enforcement of the act is overseen by the Registry of Money Lenders who licenses all companies wishing to establish themselves as financial institutions around Singapore.
The Registry is an important watchdog organisation that protects both borrowers and lenders alike from unscrupulous money lending practices. It seeks to ensure that all licensed financial institutions are operating within the law, especially regarding borrower’s rights.
There are penalties imposed on companies who violate conditions set out under the Act, including fines as well as revocation or refusal of their license.
Responsibilities of the Registry of Moneylenders
Each company applying for a license must fulfil certain conditions before approval can be granted by the Registry.
This includes proof that they have adequate resources to conduct business without defaulting on their repayment schedule with any party involved (including borrowers), they have adequate management protocols in place to ensure that their business is conducted ethically and that the company has undertaken all necessary legal obligations to operate lawfully.
The Registry of Money Lenders is required to monitor moneylender’s activities regularly, which includes monitoring credit practices and handling complaints from borrowers about unfair lending practices.
3. Issuance or Refusal To Issue License
The Registry of Moneylenders may refuse to issue a license under certain conditions (e.g. if the applicant is not financially sound, has failed to produce necessary documents and information).
The company may appeal the decision within 14 days of being informed about the refusal.
4. Renewal of License
This should be done no less than one month before the license expires.
The Registry will then analyse your credit report and business accounts as well as assess if there has been any violation or allegations against you before making their final decision on whether to grant your request for renewal.
Furthermore, renewal applications are subject to approval under certain conditions (e.g. if your firm received penalties related to money lending in the past, whether criminal or civil).
5. Revocation of License
In addition to paying fines and facing jail time if convicted of violating the Money Lenders Act’s regulations, companies found guilty of violations may also risk having their license revoked by the Registry of Money Lenders.
Specifically, companies found guilty of treating their clients unfairly and/or engaging in unfair or deceptive business practices may face license revocation.
6. Approval of Places of Business
The Registry of Moneylenders may refuse to approve the place of business if there exist reasons to believe that it will jeopardise public interest, specifically by threatening the security or safety of borrowers.
In addition, the Registry also provides assistance in cases related to money lending disputes, as well as education and counselling services for those borrowing from licensed moneylenders‘ as well as those seeking employment with such institutions or who are planning on establishing their own firms.
Advisory for Borrowers on Licensed Moneylending
Before you move ahead to loan application, it’s important to keep in mind a few bits of important information that concerns money lending itself.
It is very important that you understand your legal rights and responsibilities before entering into any agreement with a money lender.
Things to Consider Before You Borrow Money
The first thing to do is consider the responsibilities on your end. Ask yourself the following questions before getting into a loan.
1. Have you considered other alternatives?
Consider other options before approaching a moneylender, such as the various financial assistance programs offered by governmental organizations. You can learn more about the programs by contacting these agencies.
2. Are you aware of your legal obligations to the contract for the loan?
If you enter into a loan contract with a licensed moneylender, you are legally required to repay the loan.
Consider whether you can afford to adhere to the contract terms based on your income and financial obligations. Otherwise, failure to repay can mean measures that are within the stipulations of the act will be used against you, or even legal action (which means legal costs on your end).
3. Do you need the money urgently?
If so, consider other options to borrow money from such as personal loans from banks and finance companies etc. which typically offer lower interest rates than most short-term unsecured loans offered by some lenders.
You can apply for these loans at your local bank or check with Moneylenders’ Associations near you for referrals.
4. Can you repay the amount you borrowed and can you do it on time?
Borrow only what you need and are able to repay. Ensure that you have enough cash flow in your account every month before you borrow money.
Knowing that you can afford to repay the specific amount can keep you from falling into an overdraft situation which can be very costly and difficult to recover from.
You need to be aware that if you do not meet the contractual terms, the interest and late payment fees will be a financial burden not only on yourself but also on your family.
5. Can you get a cheaper loan?
If you do not already have an existing relationship with the moneylender, it may be difficult to negotiate on interest rates especially if your income is not high enough for this lender. However, some lenders allow new applicants to borrow at lower than market interest rates.
6. Do you understand the loan terms?
The borrower must ensure that they fully understand everything about their loan: the amount borrowed, the time period allowed to repay the loan, total interest payable as well as any other charges such as late payment fees/penalties etc.
Advertising Restrictions for Licensed Moneylenders in Singapore
Under the Money Lenders Act (Chapter 188, Part III), advertisements for money lending services are allowed only in the following circumstances:
- Consumer or business directories in print media;
- websites owned by the licensed moneylender, and
- banners, flyers, and other physical ads placed on the exterior or within their approved place of business.
Channels other than these are not permitted. Moneylenders licensed in Singapore are therefore not permitted to engage in TV commercials, radio advertisements, billboards, direct mailing, or text message marketing to advertise their money lending services.
The rules apply equally to online loans. Moneylenders must ensure that the information is clear and accurate on any website where loans are advertised. Licensed moneylenders are not allowed to mislead consumers through unfair practices, for instance by misleading consumers with false claims to obtain profit.
Requirements for Money Lenders When Granting a Loan
- Moneylenders are required to explain the terms of your loan to you in a language you understand before they start lending money.
- They must also deliver the signed contract including the loan terms in writing, which they need to give you before or at the same time as granting your loan.
- They will be required to send you a cautionary statement written for this particular transaction upon granting you your loan.
- Moneylenders are also required to issue a receipt for every repayment made towards the loan and provide you with a statement of accounts once every half a year in July or January. Included in this information are details like the outstanding balance on your loan, interest accrued during the period, payments you made during the period, and fees you paid.
Caps on Loan Costs
What they can charge:
- a fee not exceeding $60 for each month of late repayment;
- a fee not exceeding 10% of the principal of the loan when a loan is granted; and
- legal costs ordered by the court for a successful claim by the moneylender for the recovery of the loan.
What they cannot charge:
- Double or more than double the principal loan amount borrowed.
Caps on Loan Amount
A secured loan is not subject to a maximum amount of borrowing. Only licensed money lenders can extend loans up to 6x your monthly salary to borrowers. The table below illustrates:
|Borrower’s annual income||Singapore Citizens and Permanent Residents||Foreigners residing in Singapore|
|Less than $10,000||$3,000||$500|
|At least $10,000 and less than $20,000||$3,000|
|At least $20,000||6 times monthly income||6 times monthly income|
Moneylenders are required to appoint a reputable debt collection agency if they are unable to collect debts from accounts that are overdue. The debt collection agency must ensure that the moneylender does not engage in any of the following practices:
- Harass you by calling continuously.
- Use violence or force against you or your family members.
- Threaten to hurt you or your property.
Who can I contact for help?
If you feel harassed, threatened, bullied, or exploited by money lenders or debt collectors, do seek help immediately! You may:
- Call the Registry at 1800-2255-529.
- When you need police assistance urgently, call 1800-255-000 or 999.
- If anyone has information on loan sharks, they can also call the National Crime Prevention Council’s “X Ah-Long” hotline at 1800-924-5664.
How To Apply For A Loan
Upon applying for a loan, moneylenders need to ensure that the application is processed accordingly. They cannot reject your application without any grounds or delay in processing.
They should also give an informed response even if their approval of the loan is not final. If they reject your application, you have a right to know why and can apply again with another licensed moneylender who may approve it.
The following are key points to consider before applying:
- You are over the age of 18
- Singaporeans or permanent residents have to earn a minimum of $1,500 per month
- Foreigners must earn a minimum of S$2,000 per month
For Singaporean and Permanent Residents:
- An identification card or other document proving your identity
- Payslip for the last three months
- Documents that prove residences, such as utility bills and tenancy agreements
- SingPass is the authentication system for CPF, HDB, or IRAS websites
- An official passport
- Work Permit, SPass, and EPass
- Payslips for the last 3 months
- Payroll crediting bank statement
- An official document showing your places of residence, such as a utility bill or a lease agreement
- SingPass to access IRAS website
The 4 Steps of the Application Process
- Call or apply online. Set an appointment with your chosen lender by calling their contact, or visiting their website.
- Visit the moneylender’s office. Proceed for your appointment with a lender to provide your details and for a review of your finances. A loan plan will then be created that fits your situation.
- Finalize your loan plan. Agree on the terms of the contract. Make sure to clarify every point and that you completely understand the terms before signing.
- Receive your funds. Depending on the loan type, you may receive your funds as fast as within the hour.
Tips For Choosing The Top Licensed Money Lenders in Singapore
You don’t just want a legal service, you want an exemplary one that can not only help you with finances but also give you great service and offers.
Consider these tips when you’re choosing a lender:
1. Are they on the list?
First and foremost, you have to make sure that the business is indeed recognized by the Registry of Moneylenders. It’s as easy as checking the list on their website.
Doing this from the get-go can save you a lot of trouble of having to deal with illegal practices.
You can find the list here.
2. Check their history
The past informs possible future actions. Look into the lender and determine how long they have been established, and how they’ve gone about their lending services–from application to possible debt collection–for the past years.
3. Check for reviews
Listen to the people! Visit their website and other popular review sites, forums, and directories, and see what they have to say about the business. Word-of-mouth is a good basis for legitimacy AND reliability.
4. Check their rates
Determine if the rates are well within the required 4% limit, but more than that find a lender with the lowest possible rates. You want to incur the least amount of interest charges possible.
5. Check their repayment terms
You will want great terms to go with great rates. Find a lender that can provide you with a custom plan that fits your specific financial situation perfectly, with reasonable terms.
Moreover, find a lender with a history of amicably assisting their borrowers in the event of financial difficulty.
More Points to Ponder
1. How do you know your borrowing rights?
Singapore’s government has established comprehensive rules and regulations for licensed moneylenders. You can read them here.
2. How do I Report A Money Lender?
You can call hotline number: 1800-2255-529, or reach out to the Ministry of Law online: https://eservices.mlaw.gov.sg/enquiry/
The Bottom Line
- Do your due diligence to make sure that your rights as a borrower are protected.
- Before you deal with a moneylender, look out for signs that may point to illegal practices.
- Make sure to shop around for different lenders to find the best loan option for you.
Contact Instant Loan to get safe and convenient loan options. This loan comparison service can give you loans from licensed moneylenders in Singapore that are curated specifically to cater to your needs. Get your quotes today!