Singapore has seen major changes in the money lending industry which are aimed to protect borrowers and ensure fair practices. In recent years, the Ministry of Law has introduced new regulations under the Moneylenders Act and Moneylenders Rules, which have been amended to further safeguard the interests of borrowers. This guide will discuss licensed money lender new rules and explain how they have impacted both borrowers and moneylenders alike.

What Is the Moneylenders Act?

The Moneylenders Act serves as the foundation of moneylending regulations in Singapore. Its goal is to oversee the operations of licensed money lenders and make sure they conduct their business ethically and legally.

The Act outlines the dos and don’ts for money lenders such as interest rates, advertising standards, and operational guidelines. It’s designed to protect borrowers from unfair practices and to maintain the integrity of the industry.

Key Regulations and Impact of the Moneylenders Act

Take a look at some of the most major licensed money lender new rules introduced under the amended Moneylenders Act

Interest Rate Caps

Perhaps the most felt change is the cap on interest rates. Licensed money lenders can no longer charge more than 4% per month, regardless of whether the loan is secured or unsecured. This prevents exorbitant interest charges, making loans more manageable for borrowers.

Penalties and Fees

Aside from the interest rate, licensed money lender new rules also specify limits on penalties for late payments and administrative fees. Late payment fees cannot exceed $60 per month, and administrative fees are capped at 10% of the principal loan amount to prevent the accumulation of excessive charges that can further burden borrowers.

Advertising Restrictions

Licensed money lenders are restricted in how they can advertise their services. They’re allowed to advertise only on their websites, within their physical offices, and in official directories. This measure aims to prevent misleading advertisements that could lure borrowers into unfavourable loan agreements.

Loan Recovery Practices

Lastly, licensed money lender new rules prohibit aggressive loan recovery methods. While lenders have the right to recover unpaid loans, they must do so in a manner that respects the borrower’s dignity and legal rights. This includes providing sufficient warnings before taking any action to seize property or assets.

Other Enhancements to Promote Borrower Protection

The licensed money lender’s new rules introduced in 2018 have also added several layers of protection for borrowers.

Loan Caps Based on Income

To prevent overborrowing, licensed money lender new rules include loan caps that vary based on the borrower’s annual income. For instance, individuals earning less than $10,000 annually can borrow up to $3,000 from all licensed money lenders combined. Those earning more have higher caps, ensuring that loans remain within manageable limits.

Self-Exclusion Framework

Borrowers also have the option to exclude themselves from taking out new loans. This self-exclusion framework is designed to help individuals manage their borrowing habits and avoid falling into a debt trap. Based on this rule, licensed money lenders cannot grant loans to individuals who have opted for self-exclusion.

Strengthening the Moneylending Industry

The second phase of the new rules, implemented in the first quarter of 2019, focuses on professionalising the industry. These measures include:

Incorporation Requirements

According to licensed money lender new rules, all money lenders must now incorporate as companies with a minimum paid-up capital of $100,000. This requirement ensures that only financially stable entities can operate as money lenders.

Annual Audited Accounts

Licensed money lenders are required to submit their annual audited accounts to the Registry of Moneylenders. This transparency helps the authorities monitor the financial health and practices of lenders, further protecting borrowers.

What Is the Role of the Moneylenders Credit Bureau?

The MLCB acts as a central repository of data. It is responsible for collecting information on borrowers’ loans and repayment histories. This centralised system enables lenders to make informed lending decisions based on accurate borrower data. It also helps in maintaining the confidentiality, security, and integrity of borrowers’ information.

Borrower Responsibilities You Should Follow

While licensed money lender new rules offer enhanced protection, it’s important to note that borrowers also have responsibilities.

Know Your Loan Well

Before you agree to a loan, make sure you understand everything about it. Read all the details carefully, ask questions if something isn’t clear, and be sure you’re okay with how much you need to pay back, the interest rate, and any extra charges. This is the best way to avoid problems later.

Check If Your Lender Is Official

Always check that your money lender is on the official list from the Ministry of Law before you borrow money, whether it’s for a personal or business loan. This is a must-do step because borrowing from someone who isn’t licensed can lead to big problems, like being charged too much. You can find the list of licensed lenders online to make sure you’re dealing with a safe and legal option.

Handle Your Loan Wisely

After getting a loan, it’s important to pay it back on time and keep an eye on how much you owe. Plan your budget so you can make your payments without trouble. If you’re having a hard time paying back the loan, talk to your lender right away. They might be able to help by making it easier for you to pay back what you owe.

Bottom Line

Licensed money lender new rules mark a major step forward in protecting borrowers and ensuring a fair, transparent, and professional money lending industry. As the industry continues to evolve, these measures will play a huge role in maintaining the balance between accessible credit and borrower protection.

If you’re ready to take out a loan, we can help. MoneyIQ SG’s loan matching capabilities connect borrowers with loan providers, including licensed money lenders who comply with all the regulations set by the Ministry of Law. By using advanced algorithms to match borrowers with suitable lenders, MoneyIQ SG ensures you can access the assistance you need while prioritising your financial well-being. Get a personal loan offer here.

Published On: March 8th, 2024

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