Moneylenders Recovering Fees and Interests above Principal Sum
Ministry of LawSpeakers
Summary
This question concerns the regulation of licensed moneylenders regarding interest caps, abusive loan practices, and public awareness efforts. Mr Desmond Choo asked about enforcement against lenders exceeding principal sum recovery limits and methods to prevent short-term loans from being used to charge excessive administrative fees. Minister for Law K Shanmugam replied that no breaches of the 100% borrowing cost cap have been found since 2015, and the Ministry issued Registrar’s Directions in 2016 and 2017 to prohibit exploitative practices like split loans and "rolling over" existing debt. The Registry of Moneylenders conducts regular inspections and takes errant lenders to task to ensure compliance with the Moneylenders Act and its rules. Public awareness is promoted through media infographics, collaboration with the Moneylender’s Association of Singapore, and mandatory loan term disclosures and cautionary statements.
Transcript
28 Mr Desmond Choo asked the Minister for Law (a) how many moneylenders have been taken to task for recovering fees and interests above the principal sum; (b) how does the Ministry prevent moneylenders from giving out short-term loans in the guise of charging administrative fees; and (c) how can the Ministry improve the public's awareness on the rules governing moneylenders.
Mr K Shanmugam: In October 2015, the Registry of Moneylenders (the Registry) under the Ministry of Law (MinLaw) implemented new controls on licensed moneylenders to better protect borrowers. The new controls included a cap on the total cost of borrowing to 100% of the loan's principal sum, which helps to ensure that fees and interest do not spiral out of control. To date, no licensed moneylender has been found to have breached this rule.
Last year, the Registry received complaints and observed that some licensed moneylenders were making repeated short-term loans of less than one month and split loans. The former allowed them to charge the administrative fee several times in a month whenever an initial loan was renewed, even when no new funds had been disbursed. The latter meant that multiple late payment fees could be incurred when a single loan was split into multiple smaller loans.
In response, MinLaw issued the Registrar's Direction (RD) No 1 of 2016, which prohibits licensed moneylenders from offering short-term loans or split loans to borrowers who are unable to keep up with repayment plans. The Registry also issued RD 1 of 2017 which prohibits moneylenders from repeatedly "rolling over" existing loans and re-charging the administrative fee, when a borrower is unable to pay an instalment.
The Registry will continue to monitor the industry closely to eliminate abusive practices intended to circumvent the Moneylenders Act and the Moneylenders Rules 2009 (the Rules). It will issue new RDs when necessary. The Registry also conducts regular inspections at licensed moneylending premises, and investigates potential breaches of the Moneylenders Act, the Rules and the RDs. Errant licensed moneylenders will be taken to task.
To raise public awareness on the rules governing moneylenders, MinLaw has been issuing media releases with infographics on the moneylending rules and the RDs. MinLaw has also been working closely with the Moneylender's Association of Singapore to educate borrowers. In addition, under the Moneylenders Act and Rules, MinLaw requires licensed moneylenders to inform borrowers of the loan terms and conditions, such as the interest rate and fees of each loan granted. The RDs also require moneylenders to provide a cautionary statement in writing to borrowers before granting any short-term loans or split loans, or "rolling over" loans to refinance existing debts.