Since the Ministry of Law (MinLaw) implemented the new regulations last year, some moneylenders have been trying means and ways to game the system through gaps in the rules. With effect from 1 October 2015, loans have been subject to the following caps . They include:
- upfront administrative fee or not more than 10% of the loan principal;
- interest of not more than 4% per month;
- late interest of not more than 4% per month;
- late fee of not more than S$60 per month; and
- e) total borrowing cost of not more than 100% of the loan principal.
In a move to plug loophole exploited by errant moneylenders, The Registry of Moneylenders has issued a notice to all its moneylending licensees yesterday. Not to be confused with the changes to regulations, this list of measures is on top and beyond what was introduced last year and acts as a supplement to the Moneylenders Act and Rules. The new measures take immediate effect. We have quickly summarized the newly issued Registrar’s Directions and it is as follows:
- Lenders are required to take a pro-active measure by being stringent on their criteria on who to offer loans to. For example, those who will face difficulties making repayments and thus start to incur continuous administrative or late payment fees, among other things.
- Lenders are required to elaborate to borrowers of the terms and conditions of their loans. This includes information on how interests and other fees are computed and the scenarios on which such fees will be imposed.
- Lenders are required to furnish the borrowers with a black and white cautionary statement on exploitative loans before such loans can be disbursed.
It has only approximately been 4 months since the implementation of the new regulations by the Ministry back in October 2015. While this is a clear move by the authorities to deter unfair practices and protect borrowers, it is not one to kill off the moneylending industry. The Government accepts that there is still place for the moneylending industry because some people still fall short of meeting the banks’ requirements for loans. Nevertheless, while majority of the moneylenders will applaud and welcome the supplementary measures to the Moneylenders Act and Rules (click on link for full Act) for its transparency, it is possible that some errant moneylenders will continue to look for ways to manipulate the system for their desired outcome.