Parliament: Changes to loan limits to help nip over-borrowing

Changes to the Moneylenders Act set an overall loan limit for borrowers - a shift from the current caps which restrict how much they can loan from individual moneylenders.
Changes to the Moneylenders Act set an overall loan limit for borrowers - a shift from the current caps which restrict how much they can loan from individual moneylenders.PHOTO: ST FILE

SINGAPORE - Borrowers will no longer be able to approach multiple moneylenders and become "over-indebted".

In the latest move to regulate the industry, changes to the Moneylenders Act were passed on Monday (Jan 8), setting an overall loan limit for borrowers - a shift from the current caps which restrict how much they can loan from individual moneylenders.

This is due to "an upward trend in the amount of outstanding debt owed" since 2015, said Senior Minister of State for Law Indranee Rajah. She was responding to Non-Constituency MP Daniel Goh, who asked what led to the tightening of rules.

Moving forward, those earning less than $20,000 a year cannot borrow more than $3,000, while the cap is six times of monthly income for all other borrowers.

These changes "will help us to nip the over-borrowing in the bud before it gets worse", Ms Indranee said.

Moneylenders will also have to get a borrower's credit report from the Moneylenders Credit Bureau before giving out a loan, and are required to update the bureau on repayments.

However, Ms Indranee noted that the proportion of Singaporeans who over-borrow remains small at less than 2 per cent - or about 610 people - between March 2016 and March 2017. This refers to the group of people who have an outstanding balance that is more than the upcoming loan cap.

The Ministry of Law is also working with volunteer welfare organisations to help these borrowers manage their debt, she added.

Nine MPs spoke in support of the changes on Monday although many, including Mr Alex Yam (Marsiling-Yew Tee GRC), raised concerns that the tightening of rules may end up driving borrowers to unlicensed moneylenders.

Ms Indranee noted that since the imposition of caps in 2015, arrests for unlicensed moneylending have continued to fall: "There's no evidence that the 2015 tightening pushed more borrowers to unlicensed moneylending. We will, however, continue to monitor this closely."

While other MPs, such as Dr Intan Azura Mokhtar (Ang Mo Kio GRC) and Mr Louis Ng (Nee Soon GRC) asked about the protection of borrowers' information, which moneylenders will now have to update and request for, Ms Indranee said the companies are subject to regulations as well as the Personal Data Protection Commission's guidelines.

Responding to Mr Desmond Choo (Tampines GRC) who asked if there is a need to curb the number of moneylending facilities in the heartlands, Ms Indranee said that a study done last year with the Singapore Land Authority found that borrowers are increasingly going to moneylenders outside their neighbourhoods.

Other changes to the Moneylenders Act include tighter approval requirements for those in the moneylending businesses, and stricter requirements on loan contracts.

In a move to professionalise the industry, moneylenders will also need to incorporate as companies and submit annual audited accounts to the Registry of Moneylenders.

Almost 70 per cent of around 160 licensed moneylenders here have registered as companies, said Ms Indranee.

Mr Gan Thiam Poh (Ang Mo Kio GRC) asked about the profile of borrowers and Ms Indranee said that around 41,000 people borrowed from moneylenders as at the third quarter of last year.

Around 80 per cent of them were Singaporeans and permanent residents, subject to the regulatory loan caps, with a total outstanding loan amount of $339 million.