What Is The Money Lenders Act About?
September 28, 2023
Some are wary of using the services of a money lender in times when they need money urgently. Most resort to bank loans, but banks have a long list of formalities and requirements before you qualify for the required amount of money.
On the other hand, some may end up getting cash from loan sharks, which leads to severe financial trouble and harassment down the line.
As a result, the Singapore government came up with the Moneylenders Act.
The money lenders act is a legal document chalked specifically to protect the rights of both the borrowers and the licensed money lenders in Singapore.
It contains all the details of how a moneylending business must be conducted, the dos and don’ts of a licensed money lender, rights of the borrowers, and how to solve issues arising due to late repayment or defaulting.
All licensed money lenders have to follow the rules set out in the Act. Let’s look at the money lenders act in detail.
Definition Of A Licensed Money Lender In Singapore
The Moneylenders Act Singapore, enacted in 2008, protects the lawful rights of borrowers and moneylenders in Singapore. It does this via a legislative framework that clearly outlines permissible company operations, loan limitations, and recourse options.
How Much Borrowers Can Get From Money Lenders
Perhaps the most important piece of information described in the Moneylenders Act is the amount that a borrower can get as a loan from a licensed money lender.
Depending on your citizenship status and annual income, there are certain limits set by the government on the amount that you can legally borrow.
For secured loans, you can apply for any amount of loan that you need. There are no set limits on the amount you can get for a secured loan, as long as you have collateral and the licensed money lender can provide the loan.
As for unsecured loans, borrowers are categorised according to their citizenship status and annual income to determine the loan amounts they can get.
Singaporeans and permanent residents with an annual income less than $20,000 can borrow up to $3,000 from a licensed money lender. Singaporeans and permanent residents earning more than $20,000 annually can borrow money up to six times their monthly salary.
Foreigners residing in Singapore earning less than $10,000 a year can get an unsecured loan of $500 from a licensed money lender.
Foreigners earning between $10,000 to less than $20,000 can borrow up to $3,000. But foreigners earning more than $20,000 yearly can get loans approved for as much as six times their monthly income from a licensed money lender in Singapore.
Delving into the Money Lenders Act and its implications? At GS Credit, we pride ourselves on operating within the framework of the law, ensuring our clients receive ethical and transparent loan services. Apply for a loan with us and join the community of satisfied borrowers who trust our expertise.
What Are The Interest Rates And Fees A Licensed Money Lender Can Charge Borrowers?
The interest rate that a licensed money lender can charge is capped at up to 4% per month calculated in a reducing balance method.
If a loan installment is paid late, the late interest that a money lender can charge is also capped at 4%. A late repayment fee of up to $60 can also be charged for each month the installment is paid late.
These are some of the most important clauses of the money lenders act that licensed money lenders must adhere to. They distinguish licensed money lenders from loan sharks.
What Are Some Prohibited Practices For Licensed Money Lenders?
In addition to interest and late interest rates and loan caps, the Moneylenders Act provides a comprehensive guide on what a moneylending business is strictly prohibited from doing.
The following practices are unacceptable and must be immediately reported by a borrower:
Prohibited Practices by Money Lenders
|Asking for Sensitive Details||Money lenders are not allowed to ask for sensitive details like Singpass ID and password.|
|Not Returning Important Documents||Failing to return documents such as NRIC or passport after they’ve been used for identity confirmation is prohibited.|
|Incomplete Loan Contract||Asking a borrower to sign a blank or incomplete loan contract is not allowed.|
|Incorrect Principal Loan Amount||Money lenders must not provide an incorrect principal loan amount for any reason.|
|Rushing Contract Signing||Rushing a borrower to sign a Note of Contract without clearly explaining the terms is unacceptable.|
|Not Providing Loan Contract Copy||Failing to give a borrower a copy of the loan contract is prohibited.|
|Inadequate Document Check||Approving a loan without checking all mandatory supporting documents and completed loan application form is not allowed.|
|Use of Threats and Abusive Language||Using threats or abusive language to coerce a borrower into signing a loan contract is prohibited.|
|Harassment Over Late Payment||Harassing or using abusive language on a borrower over a late payment is not allowed.|
If your licensed money lender does any of the above, you should immediately file a report documenting the incident to the Registry of Moneylenders.
You will be required to give details of the money lender’s business name, contact number, address, and license to register your complaint.
What A Licensed Money Lender Is Permitted To Do
Licensed money lenders are permitted to advertise through only three channels.
They can advertise their business through local print and online business directories, where they must provide all details pertaining to their business, such as its registration number, contact details and address.
They are also authorised to advertise on their own business websites, but they cannot advertise their business through pop-ups displayed on other websites.
Lastly, they are also allowed to inform potential borrowers of their licensed moneylending services by placing banners or advertisements on the doors and windows of their physical office location.
However, they are not allowed to distribute flyers or go door-to-door to advertise their business.
So if you receive any call, text message, email or a flyer from a money lender describing the details of their business, chances are you are dealing with a loan shark and an unlicensed money lender running an illegal business.
Notify the relevant authorities of these illegal entities so that others do not fall into the traps set by these loan sharks.
Another way to confirm the authenticity of a money lender is to check the list of licensed money lenders in Singapore, which you can find online.
The Registry updates and maintains the list of licensed money lenders operating in Singapore. Check that the contact details and license number of your money lender match what is stated on the list.
Rules Regarding The Conduct Of Licensed Money Lenders
As per the code of conduct set by the money lenders act, licensed money lenders are strictly prohibited from harassing debtors even if payment is overdue.
Bullying, verbal assaults, threats, and violent gestures all fall under harassment. The rule also applies for any external debt collection agency that the licensed money lender is allowed to hire to recover the money.
Debtors facing harassment from licensed money lenders must immediately report the violation of the code of conduct to the police.
They can also lodge an official complaint against the licensed money lender with the Registry of Moneylenders, or the Credit Collection Association of Singapore if debt collectors harass them.
If you are unsure of how to proceed, seek help from social service agencies to decide the best course of action without putting yourself in harm’s way.
Caveats Of Money Lenders To Take Note Of
Before signing on any loan contract, you must take note of the caveat that may be lodged against you and your property, as part of the terms of your loan.
What Is A Caveat?
When you acquire a loan from a money lender, the terms of your loan can include a caveat to be lodged against your property if you default.
A caveat is defined as a legal document lodged by a person or entity with an interest in that property.
Agreeing to put a caveat on your property when you sign off on a loan means that the money lender has now a right to obtain repayment of the loan from money arranged by the sale of your property.
It also means that if your property gets sold as part of the caveat, you may not get anything from the sale of said property, specifically when the value of your property is equal to, or less than the value of your debt.
The proceeds of the sale of the property would be automatically transferred to pay back the money lender.
Therefore, it is important that you read and understand all terms and conditions before you sign your loan contract. A legit licensed money lender should explain all the terms to you in simple words before you sign on the contract.
What A Money Lender Can Do If You Can’t Pay The Loan
When you are unable to pay back a loan installment on time, then a late fee charge and late fee interest apply, in addition to the interest that you have to pay on your loan.
If you feel that you are unable to repay your loan from a licensed money lender, tell the money lender and renegotiate the terms of the contract. During the process, both parties should amicably decide on a new timeline.
All licensed money lenders are likely to help you find legal ways to assist you in paying back your loans as it is in their interest to do so. They might charge additional fees, which must be negotiated before any new deal is reached.
As mentioned before, a licensed money lender can legally lodge a caveat and seize your property to pay for the loan if you fail to do so and if the loan is secured by an asset.
Always Choose A Reputable Licensed Money Lender
It is imperative that you confirm you are working with a licensed money lender and not a loan shark.
Next, understand all terms of the loan, rethink and analyse your financial situation before signing on a loan contract with a licensed money lender.
Failing to pay back your loan can result in loss of the asset you pledged, and you may end up in greater debt than you started off with.
Are you wondering, ‘Who is the best licensed money lender in Singapore?’ Look no further than GS Credit. As a leading and fully legal money lender, we offer flexible loans at competitive interest rates. Situated conveniently near Jurong East, GS Credit is not only committed to adhering to the Money Lenders Act but also provides transparent and reliable loan services. Apply for a loan with us and experience the difference that comes from partnering with a lender who prioritises your financial well-being.
Frequently Asked Questions (FAQs)
Question: Can anyone become a licensed money lender?
Answer: No, the Money Lenders Act sets strict eligibility criteria for obtaining a license. Applicants must meet specific financial and ethical standards.
Question: What is the maximum interest rate allowed under the Money Lenders Act?
Answer: The act imposes an interest rate cap to prevent excessive charges. The exact rate may vary by jurisdiction, so it’s essential to check the specific regulations in your area.
Question: Are online lenders subject to the Money Lenders Act?
Answer: Yes, online lenders are generally subject to the same regulations as traditional lenders. The act aims to cover all forms of money lending.
Question: How can I file a complaint if a money lender violates the act?
Answer: If you believe a money lender has violated the Money Lenders Act, you can file a complaint with the relevant regulatory authority, which will investigate the matter.
Question: Can I cancel a loan agreement under the Money Lenders Act?
Answer: Yes, borrowers have a cooling-off period during which they can cancel a loan agreement without facing penalties. The duration of this period may vary by jurisdiction.
Question: What penalties do money lenders face for violating the act?
Answer: Penalties for non-compliance with the Money Lenders Act may include fines, license revocation, and legal action, depending on the severity of the violation.