Loans Offered to Private-hire Drivers by Transport Start-up without Moneylender Licence
Ministry of LawSpeakers
Summary
This question concerns transport start-ups offering loans to drivers without moneylender licenses and the potential for unfair lock-in periods or regulatory gaps. Senior Minister of State Edwin Tong Chun Fai stated that all entities performing moneylending must be licensed, exempt, or excluded under the Moneylenders Act, regardless of their start-up status. He noted that Grab has ceased new advances under its Upfront Cash Programme and explained that the specific substance of a transaction determines its regulatory status. For transactions falling outside the Moneylenders Act, existing laws such as the Sale of Goods Act and Consumer Protection (Fair Trading) Act provide regulation. Senior Minister of State Edwin Tong Chun Fai added that the Ministry of Law will work with agencies to identify and address any identified gaps in consumer lending.
Transcript
The following question stood in the name of Miss Cheng Li Hui —
5 To ask the Minister for Law (a) whether a transport start-up without a moneylender licence is allowed to offer loans to their pool of drivers at a high admin fee; (b) how can the drivers be assured that they will not be locked-in unfairly to the transport start-ups after obtaining the loans; and (c) whether there will be Government regulation on start-ups offering similar services operating within the grey area of the law.
Mr Lim Biow Chuan (Mountbatten): Question No 5, Sir.
The Senior Minister of State for Law (Mr Edwin Tong Chun Fai) (for the Minister for Law): Under the Moneylenders Act, all entities, including start-ups, can only carry on the business of moneylending if they are authorised to do so by licence, or if they have been granted an exemption, or are excluded moneylenders.
Start-ups that run schemes or programmes that constitute moneylending are subject to moneylending regulations. We understand that the Member in this Parliamentary Question (PQ) may be referring to Grab's Upfront Cash Programme, or the UCP, which offered cash advances to selected drivers and delivery partners. We understand, too, that Grab has discontinued granting new cash advances under the UCP.
Mr Speaker: Assoc Prof Walter Theseira.
Assoc Prof Walter Theseira (Nominated Member): Thank you, Mr Speaker. I thank the Senior Minister of State for that reply. I wonder if the Ministry would consider reviewing regulations covering consumer lending from non-financial institutions in general. Because this also covers hire purchase from electronic stores. This is just to balance the needs of borrowers and businesses because there are many sources of credit other than moneylenders and the banks. Those are tightly regulated but these other sources are not. All of these sources ultimately often target the same group of vulnerable borrowers.
Mr Edwin Tong Chun Fai: Mr Speaker, Sir, as the Member knows, the substance of each transaction will have to be looked at to determine the exact nature of the transaction, whether it is moneylending, whether requires licensing, or whether you can get an exemption. And the substance requires one to look at the specifics of the transaction – what are the terms, what is the context in which the transaction has taken place – to assess if the activity constitutes moneylending, in which case then licensing would follow.
Where they fall outside the scope of the Moneylenders Act, nonetheless, in such transactions, very often you would find also other pieces of legislation applying to regulate the relationship between the two parties or three parties; and that includes a Sale of Goods Act as well as the Consumer Protection Fair Trading Act. But to the extent that there remain gaps in the manner which the Member has identified, then, certainly, my Ministry will work with the agencies to identify those gaps and to look at what the necessary regulations, if at all, might be useful to deal with those gaps.