What Is The Money Lenders Act About?
December 18, 2022
Are you considering getting a personal loan from a licensed money lender in Singapore? Does the thought of taking on debt make you feel uneasy?
Don’t worry, the Moneylenders Act in Singapore protects borrowers like you from unfair money lending practices.
This blog post will tell you everything you need to know about the money lenders act, including what it covers and doesn’t cover.
What Is The Money Lenders Act?
First drafted in 2008, the Moneylenders Act is a set of laws regulating Singapore’s moneylending industry. It is administered by the Registry of Moneylenders, which is part of the Ministry of Law.
The Act defines rules and regulations related to credit, lending, collection, borrowers’ data protection, and other related matters.
The primary purpose of the money lenders act is to protect borrowers from unfair moneylending practices such as excessive interest rates and unreasonable late repayment penalties.
Let’s see what the Moneylenders Act allows licensed money lenders to do.
What A Licensed Money Lender Is Permitted To Do
Here is what the money lenders act permits licensed money lenders to do:
Have A Face-to-Face Meeting With You
As per the law, licensed money lenders are allowed (in fact, required) to have a face-to-face meeting with a borrower before disbursing a loan. They are not allowed to give out loans via telephone or email.
So if you contact a licensed money lender and it asks you to visit its office for a meeting, rest assured that it’s not a scam.
Charge Permitted Interest Rates
Licensed money lenders’ interest rates often remain unclear to new borrowers.
Remember that licensed money lenders can charge up to a maximum of 4% per month as interest on the loan amount, calculated in a reducing balance method.
However, they may offer a lower interest rate than this to attract more borrowers. But remember, an offer that is too good will most likely land you in trouble.
Also, all licensed money lenders in Singapore are allowed to charge 4% late interest on delayed payments.
Charge An Administrative Or Processing Fee
In addition to the interest rates, they can charge a one-time administrative fee not exceeding 10% of the loan amount. This fee covers the cost incurred during application processing.
Your licensed money lender has every right to demand it.
Charge Late And Legal Fees
A money lender can charge up to $60 monthly for late repayments. However, if it has to engage a lawyer for debt recovery, it can charge you an additional $100 as legal fees.
Advertise On Three Channels
Licensed money lenders are allowed to advertise their services only through these three mediums:
a) Ads placed inside the money lenders’ work premises or on the walls outside
b) Business directories (online or print media)
c) The money lender’s website
A licensed money lender won’t call or message you to promote its business and services. Now, let’s look at the other side.
Prohibited Practices For Money Lenders
The Money Lenders Act prevents money lenders from doing the following:
1. Operating Without A Licence
It is illegal for money lenders to operate without a licence.
If you’re considering taking out a loan from a money lender, check to see if the Registry of Moneylenders has licenced it.
You can do this easily by searching for their name on the Registry’s website, which contains a list of all licensed money lenders in Singapore. If the money lender is not on this list, it is not a licensed money lender.
2. Illegal Advertising
The money lenders act prohibits money lenders from advertising their services via emails, SMS, WhatsApp, or calls. Plus, they cannot distribute flyers or use affiliate marketing.
If you ever come across such advertisements, it’s best not to respond. Instead, you should report them to the Registry of Moneylenders by calling 1800-2255-529 or lodging a complaint on its website.
3. Hiding Critical Information From Borrowers
Money lenders must provide borrowers with crucial information and explain them clearly before the loan contract is signed. This includes the money lender’s name, address, licence number, and the interest and fees payable.
The contract must also state the repayment schedule and the consequences of late repayment.
4. Charging Unfair Interest Rates And Fees
The Moneylenders Act prohibits money lenders from charging unfair interest rates and fees. They are not allowed to charge more than the maximum limits set by the Registry.
As a reminder, here is what licensed money lenders can charge:
- The regular and late interest rates are capped at 4% per month
- The one-time processing fee can’t exceed 10% of the principal amount
- More than $60 per month as a late payment fee isn’t allowed
5. Threatening Or Disrespecting Borrowers
Money lenders cannot use any threat or violence against borrowers. This includes harassment, intimidation, and even wrongful confinement.
Besides the above, they are not allowed to vandalise or wrongfully confiscate your property, or harm you or your family members.
6. Giving Loans Remotely
Money lenders are not allowed to lend money online or through the phone. They may communicate the terms and conditions through call or email, but they must meet borrowers in person at their offices.
How Much Borrowers Can Get From Money Lenders
Like the fees and interest rates, the money lenders act also regulates how much money one can borrow from a licensed money lender.
While you may borrow massive amounts through secured loans by submitting collateral, unsecured loans don’t work that way.
Here is what you can borrow from licensed money lenders in Singapore:
If you’re a Singapore citizen or permanent resident who earns less than $20,000 per year, you can get a maximum loan of $3,000.
If you’re a foreigner residing in Singapore who earns less than $10,000, you can get a maximum loan of $500. However, if you are a foreigner who earns more than $10,000 and less than $20,000, you can get a maximum loan of $3,000.
Finally, if you earn at least $20,000 or more in annual income, you can get a loan equal to six times of your monthly salary, regardless of your residency status.
What A Money Lender Can Do If You Can’t Pay The Loan
If you can’t repay your loan, a licensed money lender is legally allowed to:
1. Charge a late interest of 4% per month
2. Issue a demand letter
3. Take you to court for a civil suit
Still, it can’t engage in unlawful activities, including harassing, threatening, causing injury, vandalising your property, or stalking you and your family members. However, it may reach you or your family for settlement.
You can always renegotiate the repayment terms with your licensed money lender through legal ways. But remember that it will cost you additional charges.
Important: If you can’t pay a secured loan, the money lender has the right to seize your submitted collateral.
Rules Regarding The Conduct Of Money Lenders
The Moneylenders Act explicitly protects borrowers from abuse and harassment from moneylending businesses. All licensed money lenders are required to maintain courteous conduct with borrowers.
Here are some rules they have to follow:
1. Display Name And Licence
All licensed money lenders in Singapore must clearly display their business name and the words “Licensed Moneylender” (in English).
The authorities take this practice seriously and may charge them a fine of $5,000 if a money lender fails to comply.
2. Reveal Terms And Conditions Of The Loan
A licensed money lender must inform the borrower about the terms and conditions of the loan before granting it.
This information must be presented in a document to the borrower (or an agent). The borrower has to sign and declare that he or she has been informed about the terms and conditions of the loan.
3. Provide Copy Of Agreement And Statement Of Account
Once the contract is signed, the money lender is legally obliged to give you a copy of the loan agreement and account statement.
You should also ask for receipts when you start making repayments down the line.
4. Stay Away From Unfair Practices
Money lenders can’t use any unfair practices to collect the loan amount. This includes coercion, harassment, and intimidation tactics. They also can’t mislead you into taking a loan beyond your repayment capacity.
5. Return Your Personal Documents
A money lender can only retain your documents (e.g. NRIC, passport, employment pass, etc) if it’s required for the loan application. They must return these documents to you once the loan is approved or rejected.
Moreover, they can’t ask you for your Singpass ID or password.
If a money lender goes against any of the above rules, you can lodge a complaint against it with the Registry.
Operating without a licence, harassing or threatening clients, or retaining borrower’s documents without consent is a punishable offence. These practices are punishable by hefty fines and jail time.
Caveats Of Money Lenders To Take Note Of
Beware of caveats when getting into a loan agreement with a money lender. But what is a caveat?
A caveat is a legal notice filed against a property by a potential buyer at the Singapore Land Authority (SLA). The person or organisation filing the caveat is known as the caveatee, and the property owner becomes the caveator.
Usually, a caveat is lodged by a buyer to protect his or her rights when the buyer has deposited an advance amount and wants to secure the transaction. A caveat prevents further dealings related to that property.
How is it related to moneylending? Well, certain clauses of the loan agreement can allow money lenders to lodge a caveat against your property in case of default.
This essentially puts a “hold” on your property until the debt is repaid. In that case, you may have to sell your home to the creditor (the money lender) or direct sale proceeds to its account to compensate for their loss.
In any case, you (as a borrower) are at risk of losing money if you don’t check carefully. So be sure to check clauses related to caveats in your loan agreement.
Do you need more information about your rights as a borrower?
A reliable licensed money lender like Credit Thirty3 can help. We offer affordable interest rates and no hidden fees.