The Registry of Moneylenders yesterday issued new measures to clamp down on abuses by moneylenders here.
Under the directions it issuedto all licensed moneylenders, which take immediate effect, lenders are required to stop offering loans to those who are likely to find it hard to keep up with repayment and thus incur multiple administrative or late payment fees, among other things.
"This is to prevent the snowballing of debts, which borrowers might have difficulty repaying," the Ministry of Law, which the registry comes under, said in a statement yesterday.
The directions also reminded lenders that under the Moneylenders Act and Rules, they are required to inform borrowers of the terms and conditions of loans, which includes information on how interest and fees are computed and when these will be charged.
Lenders will also have to provide borrowers with a written cautionary statement on exploitative loans - such as short-term ones of less than a month in duration that lead to overcharging - before any such loan can be granted.
The directions came just months after new rules to cap the fees and interest rates that moneylenders can charge took effect last October.
The ministry said the measures, which serve as a supplement to the Moneylenders Act and Rules, aim to address the "undesirable conduct" by some licensed lenders.
This includes offering short-term loans of less than one month in duration, which borrowers have to repeatedly re-finance by paying an administrative fee.
Another malpractice involves splitting a single loan, such that a late fee of $60 can be imposed on each component that borrowers are unable to repay on time.
Also a cause for concern is the practice of falsely informing borrowers that they can be granted only weekly loans under a "new law".
Borrowers who have been given such loans may lodge a formalcomplaint with the Registry of Moneylenders.
Those convicted of breaches of the Moneylenders Act and Rules face a fine and or an imprisonment term on each charge.
Licensed moneylenders found to be in breach of the newly issued directions will be investigated and dealt with accordingly, said the registry, which carries out regular inspections.
As of Jan 1, there were 169 licensed moneylenders in Singapore, according to the registry.
Moneylender's Association of Singapore president Peter Tan, 67, said the new directions are necessary to stop the overcharging of borrowers by a small number of unscrupulous lenders.
"As with every industry, there are bad seeds, and what some of these people do by splitting loans and charging all these fees is unconscionable," he said, adding that he believes the new measures will be effective in curbing such practices.
Mr Tan, also owner of Yong Seng Credit, described the warning statement as win-win for both sides, as disgruntled borrowers are prevented from lodging unnecessary complaints.
"They cannot claim that they have been misled, because this cautionary statement makes it clear to them; they go into it with their eyes wide open," he said.