How Do The Licensed Money Lender New Rules Protect Borrowers?

Most of us experience cash crunches from time to time. 

Despite this, borrowers must be alert when getting loans from money lenders. 

To enhance protection for borrowers, the Ministry of Law implemented rules under the Moneylenders Act 2018.

The rule was an amendment to a previous iteration of the Moneylenders Act, and is geared towards ensuring borrowers remains safe while accessing loans.

You may need cash to meet your personal or business demands. 

But being aware of the new rules may mean the difference between getting a loan safely and being a victim of unfair lending practices.

We have written a comprehensive guide to help you learn about licensed money lender new rules and how they can affect you.

How To Protect Your Rights As A Borrower

As a borrower, you protect your rights by knowing how the rules affect you. This enables you to borrow safely. 

The Singapore government has done all it can to ensure licensed money lenders follow the rules compiled in the Moneylenders Act.

Let’s look at the Moneylenders Act and the Moneylender Rules to understand the relevant laws and regulations.

Moneylenders Act

The Moneylenders Act regulates the moneylending business. 

Apart from that, it also controls the credit bureau, and the use, and the disclosure of a borrower’s information and data. 

There is also information on compliances and reports that money lenders must submit to the government.  

Note that the Act covers all licensed money lenders in Singapore, as well as their branches, and subsidiaries.

The money lending act in Singapore stipulates that no person should operate a moneylending business unless it is:

• Authorised by a valid license
• An excluded money lender, or
• An exempt money lender that has an exemption from holding a license.

Any other person or company is deemed an unlicensed money lender.

A borrower can verify whether a lender is legal by checking the list of licensed money lenders from the official website of Singapore’s Ministry of Law. 

Any business dealing or loan granted by an unlicensed money lender becomes unenforceable and cannot be recovered under the court of law.

Moneylender Rules

The Ministry of Law’s rules amendments aimed to enhance borrowers’ protection and licensed money lenders’ regulations.

The rule establishes the Moneylenders Credit Bureau (MLCB) regulatory framework by enabling the Registry to order directions that the Act provisions. 

The other duty is to ensure money lenders maintain borrowers’ data confidentiality, secure it and act honestly.

What The New Moneylending Regulations Are About

The new rules provide a comprehensive guide on:

• Aggregate loan caps and borrowing costs
• The self-exclusion framework
• Strengthened regulations of money lenders that detail how to deal with borrowers

1. Aggregate Loan Caps  

There is a limit to how much a borrower can borrow from all licensed money lenders in Singapore. 

The rules apply to Singaporeans and permanent residents, as well as foreigners residing in Singapore. The following applies:

• If the annual income of a Singaporean and permanent resident, or a foreigner is less than $10,000, he or she should not borrow more than $3,000 and $500, respectively.
• If the annual income of a foreigner is at least $10,000 but less than $20,000, he or she can’t borrow more than $3,000.
• For an annual income that is at least $20,000, Singaporeans, permanent residents and foreigners can get up to six times their monthly income.

Meanwhile, borrowing costs for licensed money lenders are as follows:

• Licensed money lender interest rate is not to exceed 4% per month
• An upfront admin fee must not be more than 10% of the principal amount
• Late fee not exceeding $60 per month
• Late interest not exceeding 4% per month

The total borrowing costs, as indicated above, should not exceed the principal amount.

Again, it’s an offense for a licensed money lender to engage a borrower in a loan contract that breaches the loan caps, interest, and fees.

Previously, there was no rule regulating what an individual could borrow from multiple money lenders. As such, many borrowers would be over-indebted. 

As such, there exists no case where two money lenders can loan the same amount to a borrower without knowing.

2. Regulated Borrowing

Another vital aspect is to help borrowers regulate what they borrow, referred to as the self-exclusion framework. 

A self-exclusion listing lets borrowers register themselves for exclusion from unsecured personal loan applications, with the exception of debt consolidation loans. 

Thus, no money lender can give a loan to any borrower who applies for self-exclusion. 

3. Strengthened Regulations For Licensed Money Lenders 

The new rules reiterate on the need to have licensed money lenders get approval from the Registry of Moneylenders. 

The regulations prevent illegal money lenders from entering the moneylending industry. 

They ensure licensed money lenders get the Registry’s approval when employing or engaging any assistant in their business. 

Also, there must be approval for anyone who wants to become a substantial shareholder or increase a licensed money lender’s substantial shareholdings. 

The Registry has the power to cancel any approval for substantial shareholders and assistants as it deems fit.

The framework for implementation is also available to the MLCB to help licensed money lenders make responsible decisions. 

More importantly, it ensures licensed money lenders are enlightened on the security and confidentiality of borrowers’ data.

Hence, it is an offense for any licensed money lender to enter into a breach of a loan contract.

How The Rules Protect Borrowers

The primary intent of the money lending act in Singapore is to protect the rights of borrowers from illegal money lending acts. 

Likewise, there is information on borrowing limits and other specific requirements a borrower should consider before applying for a loan. 

Be mindful that if you delay your payments, you may incur fees and charges that may put you under financial strain.

The new rules have brought about change. 

Borrowers must be aware of the consequences of getting loans from money lenders. Therefore, the Registry has rules on the advice that licensed money lenders should give to borrowers.

No doubt, cases of borrowers becoming victims of unlicensed money lenders are still common because some may seek short-term credit when desperate.

However, the recommendations and review of regulations have helped to curb unlicensed moneylending. 

Here are the rules:

1. 1. Licensed Money Lenders’ Names Are Now Listed On The Registry Of Moneylenders

For safe borrowing, you must check whether a lender has a valid moneylending license and if its name appears in the Registry of Moneylenders. 

Make sure you choose a money lender with favourable terms or look for alternatives from government agencies.

2. 2. Licensed Money Lenders Have To Offer Clear Information On Loan Terms And Conditions

A legal money lender needs to provide information on your loan terms. 

Once a loan contract has been signed, you should have a copy of it. Ensure you understand its terms and conditions before agreeing to sign the contract.

Never sign anything you don’t fully understand. 

Remember that by signing the contract, you will have allowed the money lender to lodge a caveat on your property that will deter you from selling it before repaying your money in full.

It’s an offense for any money lender to give you a loan contract without the proper details on interest, permitted fees payable, or your loan principal.

3. 3. Borrowers Can Report Harassment, Threats, And Intimidation

If you don’t pay up or are late in your monthly installments and receive threats, know you’re dealing with a loan shark or unlicensed money lender. 

No lender should employ aggressive techniques, even in the case of payment defaults. 

Any form of harassment must be reported by borrowers. 

Reports must also be made in case of  criminal offenses or dishonesty, or if the lender has compromised on the confidentiality, integrity, and security of the borrower’s data.

Unfortunately, if you fail to repay the loan on time, the lender has a right to sell your property. But the lender must give you ample warning.

All licensed money lenders also need to:

• Submit a borrower’s accurate information to the MLCB.
• Ensure timely updates when a borrower makes loan repayments.
• Obtain a credit report from the MLCB when issuing a loan to a borrower.

Licensed money lenders are required to follow all the rules set in the Act. Any violation leads to legal issues.

Additional Measures To Professionalise The Moneylending Industry

The new moneylending regulations have made a significant impact on protecting borrowers. In fact, the moneylending industry has been professionalised to root out poor business practices.

As such, a licensed money lender is required to:

• Submit annual audited accounts to the Registry of Moneylenders. The Act states that the auditor has to report any suspicious matter to the Registry. He or she has to be satisfied that the money lender has committed a serious breach and failed to observe the provisions of the Act.

• All licensed money lenders should be incorporated as companies by shares, having paid a minimum capital of $100,000.

• A licensed money lender in Singapore should read and adhere to the Act to protect borrowers from falling victim to loan sharks. 

As a borrower, you need to check if the name of the money lender you engage with is in the Registry of Moneylenders’ list of licensed money lenders.

You also need to consider your borrowing limit. You can’t take up more than you can repay. That way, you can learn how to settle a licensed money lender.

Do You Want To Access Credit Safely?

The Ministry of Law has done a recommendable job of catering to borrowers who are vulnerable to illegal practices. 

Now, anyone who needs short-term credit urgently can do so with peace of mind. 

The MLCB ensures better tracking of secured or unsecured loans. You only need to ensure any licensed money lender you contact is regulated under the Moneylenders Act.

If you need access to credit urgently, don’t fall victim to exploitation by loan sharks. 

Contact licensed money lender 1AP Credit today. You can also apply for a loan now to enjoy some of the most reasonable terms.