What Is The Money Lenders Act About?

Written by Shannon Wong on January 30, 2023

Do you need cash quickly? Are you thinking of getting a loan from a money lender in Singapore?

Understanding the rules and regulations that guide money lenders and money lending in Singapore may mean the difference between having a hassle-free experience or getting scammed.

The money lenders act seeks to protect the interest of borrowers from being exploited by money lenders. It highlights how to identify licensed money lenders, interest rates and fees that can be charged, as well as what a money lender can or cannot do.

While getting access to quick loans with less paperwork sounds appealing – as this is one of the advantages of borrowing from money lenders – before you take out that loan, learn everything about the Money Lenders Act in this article.

What Is The Money Lenders Act?

The money lenders act is a set of written laws governing the business of money lenders in Singapore. Under this act, no business or its agent is permitted to carry out the activity of legal moneylending in Singapore unless it has been licensed.

However, other than licensed money lenders, two categories of people can carry out the business of money lending without holding a license. They are:

  • Excluded money lenders, and
  • Exempt money lenders

Excluded money lenders refer to those who are permitted to, or not prohibited from carrying out the business of money lenders by other laws or regulations – such as pawn brokers.

Exempt money lenders are those whom the government has granted exemption from holding a license based on its discretion. However, they can carry out the business of moneylending.

The money lenders act also requires that money lenders assess the repayment capability of the borrower before granting the loan.

What’s The Role Of The Registry Of Moneylenders?

The Registry of Moneylenders is the body responsible for enforcing the content of the money lenders act of Singapore.

It oversees the practices of licensed money lenders, and ensures both a borrower and the money lender are protected by the act.

The Registry has the authority to issue or not issue licenses, renew licenses, revoke licenses, impose fines on erring money lenders, and approve or disapprove the place of business for a money lender.

It is also responsible for receiving complaints filed against licensed money lenders for unacceptable behaviours.

Rules Regarding The Conduct Of Money Lenders

According to the Money Lenders Act, there are moneylenders rules that borrowers like yourself should be aware of that guide the conduct of money lenders.

Licensing

Aside from an excluded or exempt money lender, any other individual or business engaging in moneylending must hold a valid license.

At the time of conducting business, this license must not have expired. The application for renewal must be done one month before the expiration date of the license.

If a supposed money lender doesn’t have a license, it is likely to be a loan scammer. To protect borrowers, the Ministry of Law created a list of licensed money lenders in Singapore. Only money lenders in that list are permitted to carry out money lending.

Principal Place Of Business

A licensed money lender must have a principal place of business that is approved by the Registry. When applying for a license, the place(s) must be included in writing to the Registry of Moneylenders.

Acquiring a new place of business or changing a place of business, a money lender must also make that known in writing and have the request approved.

Interest Rate And Fees

Money lenders can charge a nominal interest rate of up to 4% each month for the loan repayment period. A late interest rate of up to 4% can also be charged if a borrower fails to repay the loan as of when due.

The nominal interest rate is charged on the outstanding balance of the loan principal, not the entire loan amount.

This means if a borrower takes out a loan of $10,000 and has paid back $4,000, the 4% interest rate for that month will be on the $6,000 left.

In addition, late interest is only charged on the instalment that is due and not yet paid for a given month.

If the borrower in our example above pays out the loan in $1,000 installments every month and fails to pay for a given month, late interest is charged on the $1,000 only for that month.

Aside from the interest rate, other fees a money lender can charge include:

  • Administrative fees of up to 10% to be deducted after the loan has been granted – and not paid by the borrower upfront before loan approval
  • Late payment fees are capped at $60 for every month a borrower defaults to pay the loan
  • Legal fees mandated by the court if the money lender has to use legal actions to recover the debt

What A Money Lender Is Permitted To Do

The Money Lenders Act of Singapore permits money lenders to do the following when it comes to moneylending.

Grant Or Disapprove Loans

Money lenders are permitted to grant you a loan or disapprove a loan request once they have reviewed your loan application and assessed your ability to repay the loan.

Charge Interest And Fees

As you read earlier, money lenders can charge interest and fees for any loan as regulated by the money lenders act.

Advertisements

Money lenders are permitted to advertise their services in a manner approved by the money lenders act. The three channels for advertisement include:

  • Advertisements on business or consumer directories online or in print
  • Adverts on the websites belonging to the licensed money lender
  • Adverts placed within or outside on the exterior of walls, windows, etc, of the approved business place of the money lender

Any other channel apart from the above is prohibited.

This means that money lenders cannot reach out to you via phone, text or email to solicit that you take a loan, and cannot advertise their services on social media platforms.

Prohibited Practices For Licensed Money Lenders

Just because a money lender is licensed doesn’t give it the right to act in a certain manner such as harassing a borrower for failing to repay the loan.

To protect borrowers, the following behaviours are not acceptable from a legal money lender in Singapore.

  • Threatening or using abusive language
  • Retaining personal documents such as your identity card, employment pass, driver’s license, etc
  • Requesting for your Singpass ID and/or password
  • Granting you a loan over the phone, via text or email without requiring a completed loan application or other supporting documents such as a statement of account
  • Granting you a loan without explaining the terms of the contract
  • Asking you to sign a blank or an incomplete contract
  • Withholding a part of the loan principal (except the deduction for administrative expenses capped at 10%)

When you notice any of these behaviours from a licensed money lender, you have the right as a borrower to file a complaint to the Registry of Moneylenders.

The Registry will carry out an investigation, and the money lender will be fined or have its license revoked upon the evaluation of the degree of the malpractice.

To file a complaint against a money lender, visit the Registry’s website or call 1800-2255-529.

How Much Borrowers Can Get From Money Lenders

How much money you can borrow from a money lender depends on factors such as the type of loan, your annual income, and whether you’re a citizen, permanent resident, or foreigner residing in Singapore.

When it comes to the type of loan, secured loans – loans that require some form of collateral – have no capped amount. Provided the money lender considers the borrower eligible, he or she can borrow any amount.

Unsecured loans, however, have a capped amount according to the Money Lenders Act. The amount is capped depending on the annual income, and citizenship status of the borrower.

The table below shows the maximum amount a borrower can solicit for unsecured loans.

Borrower’s Annual IncomeCitizen or Permanent ResidentForeigners Residing in Singapore
Less than $10,000$3,000$500
At least $10,000 but less than $20,000$3,000$3,000
At least $20,000Up to 6x a borrower’s monthly incomeUp to 6x aborrower’s monthly income

What A Money Lender Can Do If You Can’t Pay The Loan

While the Money Lenders Act seeks to protect borrowers from exploitation by money lenders, you are mandated to repay their loan as when due.

When you are unable to pay back the loan, the money lender can:

  • Charge late interest and late payments fees as required by law
  • Renegotiate with you on repayment terms
  • Approve other refinancing options to help you pay the loan

If you have persistently failed to repay the loan, a money lender can hire the services of a debt recovery lawyer to recover the debt.

Once legal action has been filed against you, the court can mandate you to pay legal fees once final decisions have been reached.

However, even if a you can’t repay the loan, a money lender cannot:

  • Harass you or threaten you in any manner
  • Vandalise your property
  • Seize or liquidate any property of yours that wasn’t lodged against the loan in the contract
  • Inflict any form of physical injury on you

If you’re finding it difficult to repay the loan, you can:

  • Ask for an extension
  • Renegotiate payment terms with the money lender or seek other refinancing options
  • File for a bankruptcy
  • Use the services of the Debt Repayment Scheme

The Money Lenders Act Protects Borrowers

Money lenders are a viable option to get loans fast to finance your needs. However, you can be exploited if you aren’t aware of the laws governing money lending in Singapore as contained in the Money Lenders Act.

Having a proper understanding of the act helps you avoid loan scams, and know what to expect, or what not to expect from a licensed money lender.

If you’re looking to get a quick loan for travel, wedding, property downpayment or your business, 1AP Capital offers some of the lowest interest rates and fees.

Contact us today to speak with a loan expert, or apply for a loan now.

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