Ravi Chandran
The Ministry of Law (MinLaw) today (Jul 15) announced a comprehensive set of measures to stem the increase in moneylending activities targeting foreigners (work pass holders). Foreigners refer to individuals who are not Singapore Citizens or Permanent Residents.
By: Phoenix Lee/
This includes restrictions on the supply of loans by licensed moneylenders (LMLs) to foreigners, a reduction of the aggregate loan cap for low-income foreigners, as well as new restrictions on LMLs’ lending and advertising practices. Avenues of help are available for existing borrowers who need it. The Ministry said that new measures are complemented by education and outreach efforts by the Ministry of Manpower (MOM) and the Police, and enforcement efforts against unlicensed moneylenders.
Measures needed to address rise in moneylending activities
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MinLaw said the measures are necessary to address the rising number of foreigners borrowing from licensed moneylenders (LMLs), which has risen sharply over the past three years and has remained high. Overall, there were 53,000 foreign borrowers who took up loans from licensed moneylenders in the first half of 2019, compared to 55,000 borrowers in 2018, 19,000 borrowers in 2017, and 7,500 borrowers in 2016. The Ministry clarified that as the same borrower may have borrowed more than once within the same calendar year, the full-year and half-year figures are not directly comparable.
In addition, the self-exclusion framework which was announced in October 2018, will take effect from today.
Background
In October 2018, MinLaw and MOM announced plans to extend the aggregate loan caps and the self-exclusion framework for borrowing from licensed moneylenders to foreigners residing in Singapore, as well as administrative penalties on work pass holders who borrow from unlicensed moneylenders. These measures sought to address the increase in the number of foreigners borrowing from both licensed and unlicensed moneylenders in Singapore while the Ministry continued to monitor the moneylending activities. MinLaw has implemented the aggregate loan caps since 30 Nov 2018, and the administrative penalties on those who borrow from unlicensed moneylenders since Feb 2019.
MinLaw said that while these measures have slowed the growth in the number of foreign borrowers, the overall number of foreign borrowers remained high. Over the past year, it was also observed that some licensed moneylenders have been actively targeting work pass holders through shopfront advertisements, and readily extending loans to these borrowers.
There has also been an increase in work pass holders acting as guarantors for one another to facilitate access to loans. Guarantors become liable for the debt if borrowers default on the loan. The number of work pass holders acting as guarantors surged from about 50 in 2016, to about 6,000 in 2018. Some work pass holders were also found acting as “brokers” to facilitate loan applications by fellow work pass holders, in exchange for a token sum from the borrower.
To address the social issues arising from these moneylending activities, MinLaw, with the support of MOM and the Police, is introducing stronger measures.
Protection
MinLaw will tighten the restrictions on licensed moneylenders lending to foreigners in Singapore. These include:
- Caps on the supply of unsecured loans to foreigners.
Inclusive of their existing loan book, each licensed moneylender will not be allowed to lend to more than 300 foreigners or extend more than $150,000 in outstanding loan principal to foreigners at any one point in time. Each licensed moneylender will also be limited to granting loans to not more than 15 foreign borrowers in any month, and not more than 50 foreign borrowers in any year. Licensed moneylenders whose loan books are at or in excess of these caps will not be allowed to continue lending to foreigners. These caps ensure that the supply of credit will be calibrated to a more sustainable level.
- Reducing the aggregate loan cap for low-income foreigners, to reduce the risk of over-indebtedness.
Currently, foreigners earning less than $10,000 per annum are allowed to borrow up to $1,500 from all licensed moneylenders combined. The aggregate loan cap for this group of borrowers will be lowered from $1,500 to $500. With the existing cap on borrowing cost at 100% of the loan principal, this ensures that the maximum repayable amount (loan principal and all permitted interest and fees) is kept to a more manageable $1,000 at any one point.
- Disallowing licensed moneylenders from accepting foreigners as guarantors.
To address the increase in guarantor arrangements which facilitate further access to loans, licensed moneylenders will no longer be allowed to accept foreigners as guarantors. Foreign borrowers can continue to take up loans in their own name.
- Prohibiting advertising targeted at vulnerable groups.
Licensed moneylenders will no longer be allowed to display advertisements such as “Domestic Helpers Are Welcome”. This will reduce the visibility of easy credit to vulnerable work pass holders. Existing restrictions which disallow advertising and marketing through instant messaging or social media will continue to apply.
- No loans to be facilitated or brokered by unauthorised third parties.
MinLaw will take action against licensed moneylenders which grant loans facilitated or brokered by unauthorised third parties working illegally without the requisite work permit or authorisation. MOM will also take enforcement action against work pass holders who are found to broker or facilitate loans for gains, including revocation of their work pass.
- No cross-referral of borrowers between licensed moneylenders.
MinLaw will disallow licensees from referring borrowers to one another. This will further reduce the visibility of credit to vulnerable borrowers, and pre-empt the possibility of licensees referring borrowers to one another in an attempt to circumvent the new supply caps.
MinLaw said that these measures will be implemented with immediate effect from 16 Jul 2019, with the exception of the caps on supply which will come into effect on 15 Aug 2019 in order to give the industry sufficient notice to make the necessary system and process changes.
MinLaw said that it will continue to monitor the moneylending activities of licensed moneylenders. It added that appropriate penalties, including the suspension and revocation of licences, may be meted out to those who are found to have breached the Moneylenders Act / Rules.
Support
The Ministry said that borrowers with existing loans can continue to approach their moneylenders to negotiate debt repayment terms if they face difficulty repaying their loans. They will also be allowed to restructure their existing debt through a debt consolidation loan facilitated through a voluntary welfare organisation (VWO).
It added that work pass holders who face difficulties may also approach existing support channels such as the VWOs, the Migrant Workers’ Centre, or the Centre for Domestic Employees, for advice and assistance.
Education
MOM will continue reaching out to and educating work pass holders on how they may manage their finances to reduce the need for borrowing, and to approach their employers and NGOs/VWOs for advice and help if they have genuine needs.
For example, MOM recently produced a new money management booklet for foreign workers and a video to further raise awareness on the issues of borrowing. For FDWs in particular, MOM will also educate them and their employers of the new measures through the Settling-in-Programme and the Employer Orientation Programme respectively, and work with employment agencies and employers to inform FDWs of the implications of borrowing from unlicensed moneylenders.
Enforcement against unlicensed moneylending activities
To address the issue of foreigners turning to unlicensed moneylenders, the Police will step up their enforcement actions against unlicensed moneylending syndicates. Work pass holders who borrow from unlicensed moneylenders will also be debarred from employment in Singapore.
Launch of Self Exclusion Framework for Moneylending Activities
Min Law said that self-exclusion facility will also be available to the public from today. Singapore Citizens, Permanent Residents (PRs) and foreigners residing in Singapore can apply for self-exclusion via the Moneylenders Credit Bureau (MLCB), using SingPass.
Foreigners who do not have a SingPass account can ask a third party with SingPass to submit the request on their behalf. The application fee is $3 for applicants who submit their applications using their own SingPass account, and $5 who submit their applications through a third party.
MinLaw said that it will continue to work with MOM and the Police to monitor the moneylending activities closely and is prepared to take further action, including a complete prohibition on lending to foreigners, if necessary.
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