On 16 Nov 2018, The Ministry of Law in Singapore posted the first phase of licensed money lender new rules to enhance the protection of borrowers. This set of regulations was to be implemented from 30 Nov 2018.
Apart from protecting borrowers, the Ministry of Law wanted to strengthen the regulation of licensed money lenders. This ensures you will enjoy fair interest rates, fees, and incredible services when you approach a lender for a money loan.
This article will help you understand the Moneylenders Act, Moneylenders Rules, how you are protected by the law when borrowing from a licensed money lender, and much more.
Moneylenders Act
The Moneylenders Act 2008 outlines key issues in the moneylending industry to help licensed money lenders conduct their business as the law requires. It focuses on:
Licensing Of Money Lenders in Singapore
According to the Moneylending Act Singapore, you cannot operate a moneylending business, whether as an agent or as a principal, unless:
- You are authorised to do so by a license
- You are an exempt money lender
- You are an excluded money lender
To provide moneylending services in Singapore, you must apply for a license according to the Registry of Moneylenders’ guidelines and pay a non-refundable application fee.
The Registry has the power to issue you the license with or without conditions, and it can also turn down your application.
If you get a moneylending license, it comes into operation from the date specified on it and is valid for 12 months.
Every licensed money lender in Singapore must apply for the renewal of its moneylending licenses one month before the expiry date. On the other hand, if a lender doesn’t want to renew the licence, it should notify the Registry before its license expires.
Moneylending Regulations
According to this act, a lender’s advertising or marketing materials are considered misleading if they do not state its business name, the exact interest rate charged, or do not provide the terms and conditions.
Also, any legal money lender should not grant a loan to a person without the borrower applying for a loan in writing first. If a licensed money lender is found guilty of such an offence, it will be charged a fine of up to $20,000, imprisoned up to six months, or both.
The Moneylending Act Singapore also states that licensed money lenders should inform borrowers in writing about the terms and conditions before granting a loan. Failure to do so can cause the lender not to enforce charges such as late payment fees.
Borrower’s Information And Data
When you approach a licensed money lender in Singapore for a loan, it will ask you to provide the relevant documents.
The lender should collect your full name, date of birth, nationality, telephone number, NRIC number, and residential address.
After getting your data, the legal money lender should verify that you have provided the correct information and submit them to the Registry’s designated credit bureau.
The information is sent to a credit bureau to allow a legal money lender to obtain your credit report, which determines your creditworthiness.
If you pass the lender’s loan eligibility criteria, it should keep your credit report. However, if you do not qualify for the loan, the lender should dispose of the report the same day after informing the designated credit bureau of the reasons for declining your loan application.
Moneylenders Rules
Apart from the Moneylenders Act Singapore, the Ministry of Law also provided the Moneylenders Rules 2009 to regulate the moneylending business.
These rules include:
Regulation Of The Moneylending Business
Every licensed money lender should apply for a license replacement to the Registry if it intends to change its principal place of business. Also, if the lender wants to change its business name, it should replace its license.
Also, according to these rules, the maximum licensed money lender interest rate should not exceed 4% per month. If a borrower fails to pay his or her monthly installment on time, the lender should not charge a late interest of not more than 4% per month.
The lender should also provide the statement of account to every borrower containing details such as the lender’s business name, address and telephone number, the date when the loan was granted, and the total principal.
Unsecured Loans In Singapore
A legal money lender in Singapore should not grant a borrower any unsecured loan if the borrower’s share amount of the unsecured loan exceeds $3,000.
However, this does not apply if the borrower earns at least $20,000 per year or their total net personal assets are more than $2 million.
Licensed money lenders should also not grant unsecured loans, except a debt consolidation loan to a borrower whose credit report indicates that he or she is under a self-exclusion listing.
If a lender is found guilty of such an offence, it is charged a fine not exceeding $20,000.
Also, a lender holding a moneylending license in Singapore should not grant unsecured loans to foreigners if it has already granted unsecured loans to 300 or more foreigners yet to be paid.
A lender should also not give out loans to more than 15 foreigners in one month.
What The New Moneylending Regulations Are About
The Ministry of Law in Singapore is responsible for regulating the moneylending business in the country to protect borrowers from loan sharks. As a result, this body introduced the licensed money lender new rules on 30 Nov 2018.
This was the first phase to better the protection of any borrower. Also, the rules help strengthen the regulation of licensed money lenders in the country.
The second phase of the new rules was to take effect in the first quarter of 2019. This is to help in professionalising the moneylending industry in Singapore.
Through these regulations, Singapore’s moneylending industry would improve to allow borrowers access to personal credit safely.
The new set of rules entails:
Strengthened Regulations For Licensed Money Lenders
These regulations help the Registry of Moneylenders to prevent undesirable characters from entering the moneylending industry.
Any licensed money lender requires approval from the Registry before employing or requesting any assistance in the industry. Also, the Registry must approve anyone before becoming a substantial industry shareholder.
In addition, any legal money lender that enters into a loan contract that breaches the regulatory caps on interest and fees is charged guilty.
According to the Ministry of Law, here are the allowed interest and fees:
- A maximum interest rate not exceeding 4% per month
- A late interest of not more than 4% per month if a borrower fails to pay on time
- A fee of not more than $60 per month for late payment
- A cost of not more than 10% of the loan principal when the loan is granted
- During loan recovery, the legal cost should be determined by the court after a successful claim by the money lender
In summary, the total cost of taking out a loan, that is – the licensed money lender interest rate, late interest, late fee, and administrative cost, should not exceed the principal amount of a loan.
Additional Measures To Professionalise The Moneylending Industry
To maintain professionalism in the moneylending industry, the Ministry of Law introduced phase two of new rules that took effect in the first quarter of 2019.
Licensed money lenders in Singapore are required to incorporate as companies limited by shares with at least $100,000 paid-up capital. Also, they should submit their annual audited accounts to the Registry of Moneylenders.
How Licensed Money Lender New Rules Protect Borrowers
First, the new rules allow borrowers to limit how much they can borrow. As of 4 Oct 2018, Singapore citizens, permanent residents, and foreigners can take out loans as follows:
| Borrower’s Annual Income | Singapore Citizens And Permanent Residents | Foreigners Living In Singapore |
|---|---|---|
| Less than $10,000 | $3,000 | $500 |
| At least $10,000 and less than $20,000 | $3,000 | $3,000 |
| At least $20,000 | Up to 6x their monthly income | Up to 6x their monthly income |
Secondly, they facilitate the implementation of security, confidentiality, and integrity of borrowers’ information.
The Moneylenders Credit Bureau (MLCB) and licensed money lenders in Singapore should protect borrowers’ data. This is to help MLCB function as a central body of the moneylending data.
Also, it will help money lenders make informed and responsible lending decisions when giving out loans.
Lastly, the licensed money lender new rules protect borrowers from irresponsible borrowing through the self-exclusion listing.
This framework allows borrowers to regulate their borrowing behaviour to avoid bankruptcy. Legal money lenders are not supposed to lend to anyone who has applied for a self-exclusion listing.
Even though the licensed money lender new rules aim to protect borrowers as they take out loans, it is essential to know that you should abide by the loan contract.
Therefore, you must know how to settle your licensed money lender after the loan is granted. If you are facing difficulties repaying your loan, you can negotiate with a lender for an extension of payment duration or find another alternative.
Remember, the Registry of Moneylenders cannot help negotiate loans with a legal money lender. This is because you entered into a private contract with a lender.
Licensed Money Lender New Rules Protect Borrowers
The Ministry of Law in Singapore is doing its best to regulate the moneylending industry to protect borrowers from unsafe borrowing activities. It also controls licensed money lenders to prevent loan sharks from entering the market.
As a result, the body implemented the licensed money lender new rules that came into effect in the last quarter of 2018 and the first quarter of 2019. These regulatory frameworks make the moneylending business safer and better in Singapore.
If you are looking for a licensed money lender in Singapore operating under these rules, get in touch with Lending Bee. We are a one-stop shop for all your needs, from secured to unsecured loans.
Get in touch with us now or apply for a loan using your Singpass today. It just takes five minutes.
About Ashley Sim
Calling herself a “professional multi-tasker”, Ashley worked as a relationship manager in a bank for five years. She left her job just before the pandemic happened and became a freelance writer for about a year. Now, she’s making the most of her love for writing and knowledge of the banking and financial industry in her role as a content marketing lead. She hopes to help people make better financial decisions through her content and campaigns.
