Moneylenders (Amendment) Bill

Order for Second Reading read.

4.00 pm

The Senior Parliamentary Secretary to the Minister for Law (Ms Rahayu Mahzam) (for Minister for Law): Mr Speaker, on behalf of the Minister for Law, I beg to move, "That the Bill be now read a Second time."

Sir, the Moneylenders Act (MLA) regulates the licensed moneylending industry to ensure that a balance is struck between protecting borrowers and facilitating efficient and effective business processes.

The MLA was last amended in 2018, in part to introduce a designated credit bureau known as the Moneylenders Credit Bureau (MLCB). With this, we made it mandatory for licensed moneylenders to submit borrower information to the MLCB and to obtain a credit report of the loan applicant before granting a loan. Licensed moneylenders must also update the MLCB whenever borrowers repay their loans. The 2018 amendments have helped to professionalise the moneylending industry.

To ensure we keep up with changes in our operating environment, the Registry of Moneylenders continues to engage the industry regularly to obtain feedback and identify areas for improvement.

Today’s Bill proposes amendments that arose from these engagements and are part of the Ministry of Law's (MinLaw) ongoing efforts to enhance the licensed moneylending industry.

This Bill seeks to do three main things: first, improve data sharing and usage policies; second, enhance MLCB’s functions through the sharing and use of data maintained by the MLCB; and third, facilitate digitalisation in the licensed moneylending industry. The Bill also contains technical amendments to reduce ambiguity and increase operational efficiency for licensed moneylenders.

Let me now elaborate on the key amendments in this Bill.

First, the Bill introduces amendments to improve data sharing and usage policies.

Currently, the MLA restricts the purposes for which data can be shared. For example, the Registrar is only able to share data with other public agencies for policy formulation or review and not for other purposes, such as improving operational processes.

[Deputy Speaker (Ms Jessica Tan Soon Neo) in the Chair]

Clause 26 of the Bill introduces new provisions to align the licensed moneylending data sharing framework with the whole-of-Government data sharing approach. Moving forward, the Registrar will be able to share data in accordance with and to the extent permitted by a data sharing direction given to the Registrar under the Public Sector (Governance) Act (PSGA).

The PSGA contains the necessary safeguards to protect information that is shared. These safeguards include provisions that prevent unauthorised disclosure or improper use of the information shared and unauthorised re-identification of anonymised information.

The MLA also limits whom licensed moneylenders can share data with. For example, other than the MLCB, licensed moneylenders are currently unable to share their borrowers’ credit application and repayment information with other credit bureaux offering credit-related information. This has hampered comprehensive credit checks on borrowers.

To illustrate this point, let us consider the situation when a borrower approaches a licensed moneylender for a loan. The latter would want to check on the borrower’s credit worthiness including his credit history.

To do so, the licensed moneylender’s only recourse now is to purchase credit reports from the MLCB, which do not provide a complete picture of a borrower’s credit history. The licensed moneylender is also unable to approach other non-designated credit bureaux to purchase credit reports on the borrower, as he is not allowed to disclose the borrower’s ID number. This may enable over-borrowing by individuals who choose to withhold or inaccurately declare their credit information.

Hence, clause 16 introduces amendments to allow licensed moneylenders to disclose borrower information to more third parties, such as a prescribed list of credit bureaux. These credit bureaux will then be able to provide additional information on the borrower’s credit worthiness and indebtedness, leading to more informed and responsible lending practices.

In addition, licensed moneylenders will be able to share borrower information with any prescribed person for purposes related to the welfare and protection of applicants, borrowers and sureties. Licensed moneylenders will also be allowed to share borrower information with third parties engaged to provide IT support or to recover debts. This ensures the smooth delivery of business operations.

To safeguard information of loan applicants and borrowers, MinLaw will exercise prudence when prescribing the list of organisations that licensed moneylenders can share borrower information with, by taking into consideration whether the organisation has the necessary data protection and security measures that safeguard borrowers’ information.

The extent of the borrower information that can be shared will be limited to what is necessary. For example, in the case of purchasing a credit report from a prescribed credit bureau, the disclosure of the identification number of the loan applicant will be necessary.

The Bill will also enable licensed moneylenders to obtain records from public agencies to verify the accuracy of information submitted by loan applicants.

To ensure the security and integrity of borrower information, clause 17 introduces amendments to enhance security arrangements that licensed moneylenders must undertake to safeguard information in their possession or under their control which they have obtained or received under or for the purposes of the MLA, such as preventing unauthorised access to or use of the information.

Second, the Bill enhances the MLCB’s functions beyond just producing credit information reports and serving as a repository of data.

While the MLCB was originally launched to facilitate better tracking and monitoring of unsecured loans issued by licensed moneylenders, data held by the MLCB can be better utilised to benefit both borrowers and licensed moneylenders. For example, the Bill will allow the MLCB to provide credit reports of loan sureties to licensed moneylenders during loan applications.

To illustrate, consider a case where a loan applicant applies for a loan from a licensed moneylender and where the surety has outstanding loans with other licensed moneylenders. Currently, the MLCB is unable to provide the surety’s credit report for the licensed moneylender to independently verify the surety’s debt obligations with other licensed moneylenders. The licensed moneylender would thus be unable to make a complete assessment of the surety’s credit worthiness. With this amendment, licensed moneylenders will be able to conduct more comprehensive credit checks before granting a loan, thereby helping them manage their credit risk.

Next, clause 20 introduces a new section 74A in the MLA to allow the MLCB to produce business reports for licensed moneylenders. These business reports will assist licensed moneylenders in the development and improvement of their business strategies or practices, thereby raising industry standards.

If a credit report, business report or loan information report is delivered in error, clause 23 gives the Registrar the ability to direct these recipients to dispose of these reports within a specified time frame. Failure to comply would be an offence.

Third, the Bill facilitates digitalisation in the industry.

Clause 8 of the Bill allows licensed moneylenders to provide borrowers with statements of account through modes of communication other than mail and email. Licensed moneylenders can instead, for example, use their own app, website or business WhatsApp accounts, thereby increasing business efficiency. As a safeguard, both the licensed moneylender and the borrower must agree in writing on these new modes of communication.

The last area of the Bill deals with miscellaneous amendments that update and standardise provisions in the MLA.

To prevent miscommunication between the borrower and the licensed moneylender, clause 7 mandates that the rate of interest charged stated in any advertising or marketing material, be stated as a percentage per annum, month or other period that the licensed moneylender charges for offering loans. The Bill also makes it an offence for licensed moneylenders to demand payment from borrowers of sums other than the fees permitted or sums exceeding such fees.

To ensure consistency in business practices, the Bill extends the deadlines for licensed moneylenders and the MLCB to notify the Registrar of certain events from seven days to seven business days.

The Bill also imposes record-keeping obligations on licensed moneylenders to start keeping loan application forms and copies of supporting documents from the date the loan application form or supporting document is received. Similarly, licensed moneylenders must start keeping the note of contract from the date they issue it.

Mdm Deputy Speaker, over the past decade, the Government’s regulatory reforms have raised industry standards and provided better protection for borrowers. The amendments proposed in this Bill seek to do the same.

In summary, this Bill will allow data to be used in meaningful ways that are aligned with the whole-of-Government standards and will facilitate better business practices by licensed moneylenders. Mdm Deputy Speaker, I beg to move.

Question proposed.

Mdm Deputy Speaker: Ms Joan Pereira.

4.10 pm

Ms Joan Pereira (Tanjong Pagar): Mdm Deputy Speaker, I would like to begin by taking this opportunity to call for the better protection of all parties – moneylenders, borrowers and their sureties. We need to strengthen our system to boost our protection of licensed moneylenders and ensure that there is an even playing field for them within a healthy business environment and better risk management while holding them up to higher standards.

It is also important to protect borrowers and sureties to help them better manage their loan exposures. While they may have access to licensed moneylending services in a fair and equitable way, their personal data, histories and backgrounds should not be used unfairly against them.

Would the Ministry share with the House the regulatory and enforcement frameworks to safeguard their data and to limit the usage of their personal information for only approved purposes? What are the safeguards that MinLaw has put in place to ensure that the prescribed credit bureaus will keep borrowers' information secure and confidential?

I would also like to ask under what circumstances would borrowers' information be shared with other public agencies?

Next, I have some concerns about the proposed amendment to permit a licensed moneylender to request from the credit bureau a credit report on a surety without having to obtain the surety's consent.

While I am generally supportive of this measure, there may be instances where persons who have agreed to become sureties are not aware that their credit reports can be accessed by licensed moneylenders.

Would the Ministry consider building in a process to ensure that this is made known and explained to them before they agree to be sureties for the loan applicants? Can a surety object to a licensed moneylender retrieving his or her credit report?

Additionally, for cases where applicants have access to a free copy of their credit reports when applying for a credit line, could this be provided to sureties as well? Madam, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Next, I have some concerns about the proposed amendment to permit a licensed moneylender to request from the credit bureau a credit report on a surety without having to obtain the surety's consent. While I am generally supportive of this measure, there may be instances where persons who have agreed to become sureties are not aware that their credit reports can be accessed by licensed moneylenders.

Would the Ministry consider building in a process to ensure that this is made known and explained to them before they agree to be sureties for the loan applicants? Can a surety object to a licensed moneylender retrieving his or her credit report? Additionally, for cases where applicants have access to a free copy of their credit reports when applying for a credit line, could this be provided to sureties as well?

(In English): Finally, I hope that the Ministry would continue to work with the various stakeholders to build up the professionalism of this sector. The professional standards can be raised, for example, for the engagement of clients and methods of loan recovery without resorting to threatening or unsavoury practices. Licensees can benefit from more support from the Ministry for the training of their staff.

Would the Ministry also share about the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) measures for this sector? I support the Bill.

Mdm Deputy Speaker: Mr Neil Parekh.

4.14 pm

Mr Neil Parekh Nimil Rajnikant (Nominated Member): Mdm Deputy Speaker, thank you for allowing me to join this debate.

Before us today is the Moneylenders (Amendment) Bill. First of all, I would like to point out the unique role moneylenders play in our economy. Outside of not meeting the strict criteria of traditional banks, people often seek moneylenders for faster loan approval rates and for the ease of getting short-term urgent loans.

Also, the presence of licensed moneylenders helps us regulate and reduce the influence of unlicensed moneylenders, who are often predatory in their behavior.

I believe tightening our laws for the betterment of society is an ongoing commitment and these amendments serve to strengthen the role and work of licensed moneylenders. For a small but a very competitive economy like ours, these amendments help to further enhance Singapore's standing as a financial centre.

Mdm Deputy Speaker, the amendments to the Moneylenders Act will impact both businesses and borrowers. There are also some potential challenges which the concerned professionals will have to face. Allow me to elaborate on these issues.

I would, first, like to address the impact of this Bill on businesses.

Those business owners engaged in moneylending activities will face both challenges and opportunities. Borrowing could potentially be made easier as the Bill will bring changes to the credit reporting process, which will allow moneylenders to request credit reports on sureties without explicit consent, potentially streamlining the loan approval process. Borrowers with favourable credit histories may benefit from potentially expedited loan approval processes as moneylenders can assess creditworthiness more efficiently.

These amendments also enhance transparency and foster an environment where borrowers can expect fair and accountable lending practices. This may lead to quicker assessments of borrowers' creditworthiness. It also contributes to a more regulated and accountable financial ecosystem. Also, with the Expanded Borrower Information Disclosure in clause 16, licensees will have the ability to request and disclose borrower information for specific purposes, which might provide moneylenders with more comprehensive insights, potentially allowing for more informed lending decisions.

However, on the flipside, borrowing could be made harder as the enhanced security measures will require increased resources for compliance with the new regulations.

As credit reporting takes centre stage, it expands the functions of designated credit bureaus through clause 12, which aims to provide more information for assessing creditworthiness through the collection, use and disclosure of borrower information and data. While this could be beneficial, it may also introduce additional steps in the lending process. Borrowers, especially those seeking loans with sureties, will be directly affected.

These amendments also introduce new requirements for information submission to designated credit businesses and empower moneylenders to request credit reports on sureties without explicit consent. These new requirements could impact the loan application and approval process. For example, specifically for small and medium enterprises already grappling with higher operational and labour costs, these new requirements introduced by the Bill may perhaps be a significant hurdle.

This Bill also introduces clauses on digital statements and record-keeping. While these options could enhance convenience, there might be challenges for borrowers if there is an eventual full transition to digital methods and could deter less tech-savvy borrowers.

The designated credit bureaus will see expanded functions, including the collection, use and disclosure of borrower information. Will this expanded authority of the designated credit bureaus and data sharing with public sector agencies raise privacy concerns among borrowers and potentially deter borrowing? Balancing the greater need for information sharing with protecting borrower privacy becomes a delicate challenge.

Along these lines, Mdm Deputy Speaker, I have the following clarifications for the Senior Parliamentary Secretary.

Empowering the Registrar to share borrower or loan information with public sector agencies raises questions about the safeguards in place to protect individuals' privacy. Could the Senior Parliamentary Secretary please clarify on the criteria for information sharing, data security measures and oversight mechanisms, especially in light of recent information leaks?

The amendments also empower moneylenders to request credit reports on sureties without explicit consent. I would also request clarification on the conditions and limitations surrounding this provision.

In the amendment, there is also the introduction of a new criminal offence for wrongful demands of payment. Could the Senior Parliamentary Secretary please explain what constitutes a "wrongful demand" and the factors considered when determining this?

In summary, I believe the Moneylenders Bill and the amendments protect consumers and maintain financial stability. Notwithstanding my request for some clarifications, I stand in support of the Bill.

Mdm Deputy Speaker: Mr Louis Ng.

4.20 pm

Mr Louis Ng Kok Kwang (Nee Soon): Madam, this Bill will allow licensed moneylenders access to relevant credit information before deciding to grant a loan. The Bill will also require licensed moneylenders to take additional steps to protect information and records kept.

These amendments will support the MLCB's work in encouraging financially prudent borrowing. I have three points of clarification.

My first clarification is on a licensee's discretion to obtain a credit report on a surety of the application before deciding whether to grant a loan. The new section 66A(4) permits but does not require a licensee to obtain a credit report on a surety. Can the Senior Parliamentary Secretary share if any guidance will be provided to a licensee on situations where a licensee is recommended to obtain a credit report on a surety? Can the Senior Parliamentary Secretary clarify how it will ensure that licensees do not request credit reports for purposes other than to assess the creditworthiness of a surety?

I understand licensees face a fine or imprisonment for misrepresenting the purpose of a credit pull. Can the Senior Parliamentary Secretary explain how such misrepresentations will be detected and policed? After all, when licensees make credit pulls, they are not obligated to inform those targeted about it.

My second clarification is on providing notice to the surety if the surety's information is submitted to MLCB or other parties. There is a requirement under section 66(4)(b) that the licensee must inform the applicant in writing that certain information from the applicant will be submitted to MLCB to obtain a credit report. The licensee must also inform the applicant that the information may be disclosed to other parties.

However, section 66A(7) provides that a licensee is not required to seek the surety's consent before requesting a credit report on them. Can the Senior Parliamentary Secretary clarify why a licensee must inform an applicant that it is submitting the applicant's information to MLCB to obtain a credit report and that the information may be disclosed to other parties, but it does not have to inform a surety when the surety's information is actually submitted to obtain a credit report?

My third and final clarification is on the safeguards for borrower information disclosed. Under the new section 69(3A), a licensee may disclose borrower information, including information in a credit report to certain third parties. These third parties include an assistant of the licensee to collect debt, a contractor or agent to maintain the information system and any public agency to obtain any public record. Additionally, the licensee can disclose information to MLCB and any prescribed persons for purposes related to the welfare and protection of applicants.

Firstly, can the Senior Parliamentary Secretary share what it considers to be purposes "related to the welfare and protection of applicants"? Can the Senior Parliamentary Secretary also share who the prescribed persons are intended to be?

Secondly, there are requirements on how long a licensee can retain information and on safeguards that a licensee must have to protect information. A licensee must dispose of a credit report five years after the date the loan is fully repaid or the contract is terminated. If the loan is not granted, the credit report must be disposed of within one business day that MLCB is informed of the reasons for declining the loan.

The licensee is also required to make reasonable security arrangements to protect the information, including information in a credit report. Can the Senior Parliamentary Secretary share how these safeguards are extended to information provided to other third parties, such as assistants, contractors or agents? What steps will a licensee have to take to ensure that the information provided to third parties is kept secured, not used for other purposes and properly disposed of? Madam, notwithstanding these clarifications, I stand in support of the Bill.

Mdm Deputy Speaker: Senior Parliamentary Secretary Rahayu Mahzam.

4.24 pm

Ms Rahayu Mahzam: Mdm Deputy Speaker, I thank the Members for their support of the Bill.

Members also made comments and suggestions on: (a) usage and protection of borrowers' confidential data; (b) obtaining credit reports in respect of sureties; (c) the offence of a wrongful demand of payment; and (d) Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) measures for the licensed moneylending sector.

Let me address each group of issues in turn.

First, I deal with the usage and protection of borrowers' confidential data. Ms Joan Pereira and Mr Neil Parekh asked about the circumstances under which borrowers' information would be shared with other public agencies and the safeguards in place to protect such information.

Whilst I mentioned the circumstances and safeguards in my opening speech, I would like to highlight that the proposed amendments are aligned with what is practised across the Government as set out in the Public Sector (Governance) Act.

The Public Service has in place a data-sharing framework and is governed by Instruction Manuals, which amongst other things, oblige public agencies to safeguard data against security threat, protect personal data and access information only on a need-to-know basis. These data sharing provisions will enable better policy analysis, planning and formulation and better delivery of services.

Ms Joan Pereira and Mr Louis Ng asked about the safeguards to ensure that the prescribed credit bureaus and other third parties will keep borrowers' information secure and confidential.

The prescribed credit bureaus and other third parties are subject to the obligations under the Personal Data Protection Act. For example, they must protect the data in their possession by making reasonable security arrangements to prevent unauthorised access, use or disclosure. Their ability to do so is something we will consider carefully when deciding whether to prescribe particular credit bureaus to be able to receive borrower information.

On a related matter, Mr Louis Ng referred to the proposed amendments for licensees to disclose information to any prescribed person for purposes related to the welfare and protection of applicants, and sought clarification on what these purposes are and who the prescribed persons are intended to be.

For a start, we intend to prescribe social service agencies (SSAs) which have been assisting borrowers in negotiating debt consolidation loans or restructuring plans with licensed moneylenders. The disclosure of loan information to such SSAs is essential for effective negotiation and should ultimately benefit the borrower.

More broadly, in deciding whether any person, organisation or otherwise should be permitted access to the confidential information, MinLaw will, among other matters, assess and consider the need for the possible disclosure and consequential benefits.

Next, I turn to the obtaining of credit reports on sureties.

Mr Louis Ng and Mr Neil Parekh sought clarification regarding situations where a licensee is recommended to obtain a credit report on a surety. Mr Louis Ng also asked how MinLaw will detect and ensure that licensees do not request credit reports for purposes other than to assess the creditworthiness of a surety.

Licensed moneylenders can only obtain a credit report of a loan applicant or a surety when a loan application is received. It is a risk management call and a business decision for a licensee whether it requires a surety's credit report for its creditworthiness assessment.

The Registry of Moneylenders conducts regular inspections and investigates breaches of the Moneylenders Act. This will help ensure that credit reports are only obtained for proper purposes.

Members of the public can also lodge a report on potential infringements with the Registry of Moneylenders.

Additionally, Mr Louis Ng and Ms Joan Pereira asked about the notice provided to a surety that his or her information will be submitted for the purpose of obtaining the credit report. Ms Pereira also asked whether a surety may object to a licensed moneylender retrieving his or her credit report.

As I mentioned earlier, the credit report can only be obtained when a loan application is made. In other words, the applicant and surety would be fully aware that the licensed moneylender would conduct due diligence to assess the creditworthiness of both the applicant and the surety.

In the event a surety objects to the retrieval of his or her credit report, the licensed moneylender may make an alternate lending decision to manage its risk accordingly.

I thank Ms Pereira for her suggestion for sureties to be given a free copy of their credit report. We will consider this.

Next, in terms of a new offence being introduced, Mr Parekh sought clarification on what constitutes a licensee making "wrongful demand of payment" from a borrower. This amendment clarifies that it is an offence if a licensed moneylender, without reasonable excuse, demands payment from a borrower of a sum that is either not permitted or which exceeds the permitted amounts. Licensees found to have committed this offence can be fined up to $20,000 or imprisoned up to six months, or both.

Finally, Ms Pereira asked about the AML/CFT measures for the licensed moneylending sector. The AML/CFT measures for licensed moneylenders are mainly set out in the Moneylenders (Prevention of Money Laundering and Financing of Terrorism) Rules. These rules are aligned with the international standards set by the Financial Action Task Force.

In the conduct of its business, a licensed moneylender must have measures in place to assess the risk of, detect and prevent money laundering and terrorism financing. Measures include the screening of persons and the conduct of customer due diligence.

I would like to conclude by thanking the Members once again for their support of the Bill and for their invaluable comments and suggestions.

The proposed amendments to the Act will allow data to be used in meaningful ways that are aligned with the whole-of-Government standards and will facilitate better business practices by licensed moneylenders.

MinLaw will continue to monitor and improve the standards of the licensed moneylending industry while ensuring that borrowers are adequately protected.

Mdm Deputy Speaker: Any clarifications? None.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Ms Rahayu Mahzam.]

Bill considered in Committee; reported without amendment; read a Third time and passed.

Mdm Deputy Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 5.00 pm.

Sitting accordingly suspended

at 4.33 pm until 5.00 pm.

Sitting resumed at 5.00 pm.

[Mr Speaker in the Chair]