New regulations were enacted in Singapore since October 1, 2015, for licensed moneylenders concerning unfair fees and contracts, interest rates, and unfair lending practices. Some of these regulations are:
- a limit of $60 on late fees each month,
- Upfront administrative fees not exceeding 10 % of the principal amount, if there was no earlier set upfront administrative costs; and
- a full borrowing cost not exceeding 100 % of the initial personal loan.
These guidelines were established to help prevent debts from getting out of hand and consequently, prevent abuse in the hands of the moneylenders.
New Regulations to Tackle Abuses
In order to tackle the new abuses, the Moneylender Registry has resulted in setting out more and new regulations to tackle such abuses. The new rules were given to the licensed moneylenders on 26 January 2016 via a set of Directions and were effected immediately. These rules were put in place to tackle 3 specific cases of abuse:
- Short-term loans, that are loan types subsisting for under a month, thus it forces borrowers to continually pay administrative charges to re-finance their personal loan, as stated above.
- Borrowers getting misinformed that they will be given only weekly loans following the “new law”;
- Split loans, that involve splitting one loan into various segments, in a way that late fees may be imposed on every segment that an individual is not able to pay back on time;
At present, the Moneylenders Act already has made it mandatory for the licensed moneylenders to inform customers of the conditions and terms of their personal loans. This will include information concerning how the fees and interest are worked out and even when they are to be charged.
Any licensed lender who fails to do this will be chargeable of such an offense and will be answerable on conviction for a fine that does not exceed $20,000 or imprisonment for the period, not more than 6 months, and even both.
Moneylenders Taking advantage of Loopholes
Even so, despite having these new guidelines in place, some moneylenders have tried to exploit the loopholes to go around the new rules. According to some debt counselors, an instance would be the issuance of the weekly loans, by which those borrowers who do not make to pay off their debt will need to pay a 10% upfront administrative charges to “re-contract”.
This, together with the fees charged as late payment costs, has resulted in monthly interests exceeding 40 % – that is about twice the interest rates that moneylenders charged in the past before the interest limits were enforced following these new regulations.
Moneylenders to present borrowers cautionary statements
To add onto the Moneylenders Act, these new rules state that the licensed moneylenders also have to offer their borrowers the cautionary statement done in writing prior to giving any personal loan.
This cautionary statement serves to warn their customer of any abusive activity done by moneylenders. It further states in particular on how the short-term loans, as well as split loans, are kinds of undesirable activities.
The cautionary statement then further provides the borrower with details concerning where to report a formal complaint. This is in case that the licensed moneylender has offered such a loan. Then the borrower has to sign this cautionary statement in order to confirm they have received as well as understand it.
It seems to be a rather effective method of dealing with the core of the issue. The problem is that of addressing the information imbalance which borrowers face. Through informing the borrowers of the frequent abuses in the lending system they are thus made aware of what to be cautious of and avoid.
Even so, whether a legal moneylender will really provide the cautionary statements to their borrowers still remains unclear. It perhaps needs to be done more so as to ensure that all the licensed moneylenders will really implement the new regulations.
For instance, it might be possible to specify that the content of the cautionary statements is to be put up as a type of posters to be put at the business counters of the licensed moneylenders. They need to be put in full view that potential borrowers can see them.
The Singaporean Registry of Moneylenders has also emphasized following these Directions that the licensed moneylenders have to stop providing personal loans to clients that seem to not be able to manage to make the repayment plans set for them and they have to incur many late repayments or even administrative fees. Even so, it is not clear of the effectiveness of such a warning could be.
All the same, the Moneylenders’ Registry have stated that those licensed moneylenders who will be found to have breached the given Directions will from that point be investigated and then dealt with in accordance to the law.
Recovery Of Repayments Made To Moneylenders
When the rates of interest charged by a moneylender are in excessive and that the transaction is unconscionable or even be substantially unfair. Then the borrower may apply to the court and ask to be granted a relief.
In accordance with the Moneylender’s Act section 23, the court may re-open the loan transaction and even order your moneylender to pay you back the extra amount to the borrower. This and many other remedies. Do consider making an inquiry with your debt recovery lawyer to have a quotation to get this done.
Since October 1 2015, new regulations were enacted in Singapore for the licensed moneylenders with regards to unfair fees and contracts, interest rates, and unfair lending practices. Now, the Moneylenders Act has already made it mandatory for licensed lenders to inform their customers of the conditions and terms of their personal loans.
In addition, these new rules state that the licensed moneylenders also have to present their borrowers with the cautionary statement done in writing prior to giving any personal loan. The Singaporean Moneylender’s Registry has also emphasized on following these Directions that licensed moneylenders need to stop extending personal loans to clients that seem to not be able to make repayments for their loans.