A central credit bureau will be set up to allow tighter controls over the total amount of unsecured loans that an individual can borrow from licensed moneylenders, Senior Minister of State for Law Indranee Rajah said in Parliament on Wednesday.
This would mean introducing a "universal cap" on how much a person can borrow from all moneylenders, as opposed to the current regulation regime, which imposes a borrowing cap on each moneylender.
Members of Parliament Lim Biow Chuan and Zainal Sapari highlighted concerns over excessive borrowing and excessive borrowing costs from licensed moneylenders.
Ms Rajah said that in regulating the moneylending industry, the right balance had to be struck between allowing borrowers reasonable access to credit and providing them with adequate protection. She said the ministry is consulting key industry stakeholders in its review of the moneylending regime and that the measures will be announced in due course.
Law Minister K. Shanmugam, addressing the issue as well, underscored that a balance had to be struck. He noted that when artificial curbs are imposed, the borrower and the lender may find alternative means and be driven underground.
Mr Zainal (Pasir Ris-Punggol GRC) called for measures to better regulate licensed moneylenders. He said he has seen borrowers' receipts where the effective interest rate amounted to a "shocking" 43,000 per cent per annum and another where the effective interest rate was at 159,000 per cent per annum.
Mountbatten MP, Mr Lim, urged the Law Ministry to do more to protect residents who face temporary cashflow problems or need cash quickly for a short term.