Borrowers will have their loans capped at an amount that applies across all licensed moneylenders, under proposed changes to the Moneylenders Act.
Currently, there is a cap on loans taken from individual moneylenders, but borrowers can still approach other registered moneylenders.
To prevent people from borrowing beyond their means, an aggregate loan cap has been proposed under the Moneylenders (Amendment) Bill tabled by the Law Ministry in Parliament yesterday.
Under this cap, those with an annual income of less than $20,000 may borrow up to $3,000 from all moneylenders combined.
Other individuals may borrow up to six times their monthly income from all moneylenders combined.
Moneylenders cannot provide loans beyond the cap, and must obtain credit reports from the Moneylenders Credit Bureau (MLCB) to check if a borrower has exceeded the limit before issuing a loan.
Reports can be obtained online, and moneylenders have to update the bureau after dispensing the loan.
The proposed penalty for failing to obtain the MLCB credit report is a fine of up to $20,000 or six months in jail, or both.
Moneylender's Association of Singapore (MLAS) vice-president Kenny Ng said the cap will affect business in the short term, as borrowers take fewer loans. "But in the long run, it will stabilise the industry and increase the likelihood of borrowers repaying debts."
Ms Jolene Ong, chairman of Arise2care Community Services, which conducts debt counselling, said the changes will prevent people from over-borrowing. She noted that it is common for those in debt to borrow from multiple moneylenders.
However, the proposed rules might cause borrowers to turn to unlicensed moneylenders, she said.
"This is a concern, and we do foresee this happening. But for now, we can only educate people on the dangers of borrowing from loan sharks, which is something we are working on with the MLAS," she added.
The total outstanding amount in licensed moneylending loans has been increasing, according to figures provided by the Law Ministry. It was $367 million last year, an increase from $282 million the previous year and $239 million in 2014. The number of borrowers also went up to 40,000 last year, from 35,000 in 2015 and 31,000 in 2014.
Under new laws proposed in the Bill, moneylenders must get approval from the Registrar of Moneylenders before employing assistants. They must also seek approval before anyone can become a substantial shareholder, or increase substantial shareholdings.
The registrar may cancel approvals for assistants and substantial shareholders to exclude "unsavoury characters" from the industry, such as those with previous loan-sharking convictions.
Moneylenders will also need to incorporate as companies and submit annual audited accounts to the Registry of Moneylenders, in a move to professionalise the industry.
More than two-thirds of the 160 licensed moneylenders have already registered as companies.
The Law Ministry also tabled the Supreme Court of Judicature (Amendment) Bill yesterday.
The proposed new laws will, among other things, make clear that the Singapore International Commercial Court, as a division of the High Court, has jurisdiction to hear matters relating to the International Arbitration Act.