SINGAPORE - Remittance firms have to stop loan services by Sept 10, according to a prohibition against such lending issued by the Monetary Authority of Singapore (MAS) on Monday (June 10).
The prohibition will not affect existing loans, including restructured and refinancing loans.
"MAS continues to monitor the lending activities of remittance licensees closely, and will not hesitate to take further actions where appropriate," said a spokesman.
In October last year, the MAS told The Straits Times it was reviewing such loan practices after the paper reported how Toast Me, a remittance licensee in Lucky Plaza, was granting cash advances with interest to maids. In a contract seen by ST, the firm charged a maid 10 per cent interest for a loan amount of $700. Only $630 was issued to her after a "first-time fee of $70" was deducted.
Industry observers said it was unusual for remittance firms to be offering loans when their primary role is to receive money for the purpose of transmitting it overseas, but noted that some remittance firms might be exploiting a loophole in the regulations, since they are not licensed moneylenders under the oversight of the Ministry of Law.
Statistics show that more foreigners are borrowing from licensed moneylenders, rising from 7,500 for the whole of 2016 to 35,000 in the first half of 2018.
New loan caps were introduced by the Government to tighten moneylending rules to protect foreigners living and working here, which has caused some borrowers to turn to unlicensed sources for loans.
The prohibition notice was issued even before the new Payment Services Act comes into force. Under the upcoming Act, licensees offering payment services such as remittance will be prohibited from granting loans to individuals.
The existing Payment Systems (Oversight) Act and the Money-changing and Remittance Businesses Act will both be repealed when the new legislation takes effect next year.
Pastor Billy Lee, executive director of Blessed Grace Social Services, who has received distress calls from maids with multiple debts, said he has handled about 110 instances of maids who had taken loans from Toast Me. Some have lost their jobs here and were sent home as a result of "Toast's aggressive collection tactics", such as sending letters of demand addressed to their employers and continually harassing them with threatening text messages.
Pastor Lee urged the authority to stop the loan services with immediate effect so as "to prevent Toast from aggressively advertising their credit facility to foreign domestic helpers who have reached their borrowing cap of $1,500 with the licensed moneylenders".