Personal Finance

How Do The Licensed Money Lender New Rules Protect Borrowers?

October 14, 2022

Moneylending can be a good option for those who need immediate access to cash in times of financial difficulty. 

While it has its benefits, there is the possibility a borrower may end up being a victim of fraud or even loan sharks.

Thankfully, the Moneylenders Act protects borrowers from predatory lenders. The Act lays down the ground rules that all financial institutions must adhere to. 

These rules include how licensed money lenders conduct business, lending procedures, as well as the interest rates and authorised fees they can charge.

Knowing about these regulations is essential for a borrower like you so you know how to settle a licensed money lender. 

So is reviewing how licensed money lender new rules protect borrowers.

Moneylenders Act 

Singapore enacted the Moneylenders Act in 2008 to shield borrowers’ and lenders’ legal interests. In 2018, Singapore amended the Act to improve the protection offered to borrowers. 

The Moneylenders Act provides a legal framework that specifies the operations that are acceptable for licensed money lenders. 

The Act also limits how much money borrowers can get and outlines they can get help if money lenders flout the rules. 

In Singapore, only those who have a moneylending license can engage in the business of lending money. The money lending act in Singapore outlines the entities legally engaging in moneylending.

Moneylenders Rules 

The Ministry of Law (MinLaw) released the Moneylenders Act Singapore (Amendment) as part of a first-phase plan to improve protection for borrowers.

In its first implementation stage, it placed limits on the total loans that citizens and foreign residents of Singapore can take out from all licensed money lenders.

With these limits in place, Singaporeans who earn less than $20,000 annually can borrow only $3,000 from a money lender.

Borrowing limits from all money lenders combined have a cap of six times monthly income for Singaporeans and permanent residents with an annual income of over $20,000.

However, a lower aggregate loan maximum of $500 is available for foreign residents in Singapore with yearly incomes below $10,000.

Foreigners with annual incomes of $10,000 to $20,000 are eligible for a $3,000 loan. 

Borrowers with annual incomes of at least $20,000 are eligible for loans that are six times their monthly income, regardless of whether they are Singaporeans, permanent residents or foreigners. 

In addition, licensed money lender new rules put a cap on the interest and fees that money lenders can impose.

To further protect borrowers from unwittingly falling victim to predatory or unfair practices, the new rules stipulate licensed money lenders cannot charge borrowers excessive fees and interest charges.

A legal money lender can impose a maximum interest rate of:

Loan interest rate: Up to 4% per month on the outstanding principle.

Late interest: Each month of late payment will cause a penalty of up to 4% of the total amount owed.

Late payment fee: Up to $60 for each month that payment is late.

Admin fee: Maximum 10 percent of the principal.

The sum of the loan’s principal, plus any late fees, administrative fees, interest, and late interest levied by your money lender cannot exceed the amount you borrowed.

If a successful claim is made to recover a loan, a legal money lender can collect its legal expenses.

What The New Moneylending Regulations Are About

MinLaw began enforcing the Moneylenders (Amendment) Act 2018 and Amendment Rules on 30 Nov 2018. 

The purpose is to improve consumer protection and tighten the oversight of licensed money lenders.

The second phase of implementation was made to regulate the moneylending business.

These reforms to the lending system have made it easier for borrowers to receive the personal loans they need without putting themselves at risk.

The revisions to the Act’s provisions reflect previous borrowers’ reports and suggestions. Here are some of the changes made:

1. Enhanced Data And Privacy Protection For Borrowers

The amendment established more stringent regulations to safeguard borrowers’ personal information. 

As a result of the new regulations, licensed money lenders are now prohibited from disclosing borrowers’ personal information.

2. Using Interest Rate For Loans Instead Of The Nominal Interest Rate

Lenders used to promote their products using a “nominal interest rate” in the past. 

A nominal interest rate is a percentage that does not reflect the true extent of compounding. It has frequently confused borrowers regarding the amount of money they owe.

Now, the licensed money lender interest rate must be clearly explained under the revised Act. 

It includes the principal amount, charges, fees, and interest rate so borrowers can make more informed financial decisions.

3. Loan Cap Limits Established To Safeguard Borrowers

According to the licensed money lender new rules, there is a cap on how much a person can borrow. 

This cap helps to guarantee that borrowers will keep up with their loan payments. A borrower can also tell if a money lender is legit by looking at its maximum loan amounts.

How Licensed Money Lender New Rules Protect Borrowers

The total amount of money an individual can borrow from all licensed money lenders has a cap, thanks to licensed money lender new rules. 

The following limits, announced on 4 Oct 2018, apply to Singaporeans and foreign residents.

To support the execution of the aggregate loan cap, a regulatory framework for the Moneylenders Credit Bureau (MLCB) came into operation. 

The MLCB and licensed money lenders now have responsibilities under the new framework to protect the privacy and security of borrower information. 

As a result, the MLCB can serve as a repository for information related to the moneylending industry. It also empowers lenders to give borrowers ethical loans.

As part of licensed money lender new rules, a self-exclusion structure has been included to aid borrowers in controlling their borrowing habits. 

It has also helped them take advantage of debt relief programmes. 

The framework forbids licensed money lenders from extending credit to anyone requesting self-exclusion from receiving loans. 

The self-exclusion mechanism is currently in place and accessible.

Strengthened Regulations For Licensed Money Lenders

According to the law, licensed money lenders must get approval from the Registry of Moneylenders before hiring or engaging any assistants for the business. 

This helps to tighten the oversight of licensed money lenders.

The Act also states that becoming a significant stakeholder in a licensed money lender company requires the Registry’s approval. 

The second implementation phase took effect in 2019 to professionalise the money lending business.

Today, all registered money lenders must form limited liability companies with a minimum paid-up capital of $100,000. 

They also need to submit audited financial statements annually to the Registry of Moneylenders as part of the process.

MinLaw’s proposed changes to the moneylending system make it more difficult for criminals to target individual borrowers while maintaining their right to secure personal credit.

Additional Measures To Professionalise The Moneylending Industry

Singapore’s moneylending industry may be relatively new, but it has made significant progress in its efforts to enhance service. 

The Credit Association of Singapore (CAS), formerly known as Moneylender’s Association of Singapore (MLAS), ensures that all licensed money lenders in the country adhere to a minimum level of professionalism and education. 

Former members of the MLAS make up this group. 

The MLAS felt a shift was necessary to better reflect its goals and the industry’s progress. As a result, it changed its name to CAS.

With the rebranding came the conversion of MLAS money lenders into CAS members. 

The CAS acknowledges that the participation and close cooperation of Singapore’s licensed money lenders is crucial to accomplishing its mission. 

Goals Of The CAS

The CAS aims to work closely with the Registry of Moneylenders, a section of the Ministry of Law, to: 

  • Promote lending money as a crucial component of the financial services industry
  • Encourage ethical codes in the lending sector
  • Consult and cooperate closely with relevant governmental bodies to preserve tight links and cordial relationships
  • Speak for, promote, and advance the membership’s interests
  • Update members on relevant industry news

How CAS Benefits Money Lenders

1. Conferences, Seminars, And Other Forms Of Professional Training

Money lenders can attend training seminars, workshops, and other special events to improve their knowledge and professionalism.

A comprehensive preparation programme for the moneylender’s exam is also available, a requirement when registering for a moneylending license. 

Interested parties who are curious about Singapore’s loan sector can participate. At the moment however, no new moneylending licenses are available. 

2. Online Loan Tracking And Borrower’s Report System

The CAS has mandated a consolidated online loan and borrowing reporting system to aid money lenders in facilitating the necessary background checks.

Individuals who are members of the ML Loan System have easy access to comprehensive information on potential borrowers. 

The system includes information such as the borrower’s litigation history, imposed restrictions, and loan default rates.

It aids money lenders in processing loan applications more quickly, much to the satisfaction of their customers.

Licensed Money Lender New Rules Protect You

You should feel more secure knowing that Singapore has a comprehensive legal system to shield borrowers like you from loan sharks. 

If you need money, only go to licensed money lenders.

GS Credit is here to help you with your financial needs, and we are proud to say that we are a top choice among borrowers in Singapore. 

We have simple loan terms to fit your capacity to repay with no tedious paperwork or complicated procedures.

To learn more about our low-interest loans, contact us today or apply for a loan now.

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