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Notes to Borrowers When Obtaining Loans from Licensed Moneylenders

The lure of moneylenders

comes from their convenience. A convenience that provides one with both the ease of access and the quickness of it. This is especially enticing for folks who experience sudden change of lifestyle conditions or development of unexpected events.

Comparing to banks, one could probably expect a higher loan amount after a more tedious process and checks that are more stringent. Let us delve a little more, licensed moneylenders usually offer small loans, and this is largely due to their typical small-scale businesses. Logically, they do want to run the risk of losing millions if a borrower defaults. Although similar to banks in that loans are pegged to income levels, loan amounts can be as low as a few hundred dollars or up to a couple of thousands.

Assessments may not be as detailed, along with less restrictions, loans can be approved and released within minutes. On top of the smaller loan amounts, this certainly would be appealing for someone “in need of fast cash”. Not forgetting, there are advertisements aplenty promoting such loans online and on traditional media.

Because of the convenience, and many a times, the urgency of it, many details are missed out when taking up a loan with moneylenders. In some scenarios, it could just be the lack of awareness too. Perhaps, there should be more prevalent information which as of now, there is only one accurate source – the Ministry of Law. (You may refer to their webpage for more information).

As things stand, the number of borrowers has escalated to an extent that prompted the authorities to impose tighter measures. Of these borrowers, many are experiencing difficulties servicing the loans, and there can be many reasons how this become a full-blown problem to some.

At SG DebtBusters, we strive to offer the best advice and the most suitable solution to your concerns. With a detailed assessment, we could understand the details of one’s financial situation and share critical information. If caught in similar difficult predicament, do not hesitate to contact us so we may point you to the right direction.

Debt with licensed moneylenders is becoming an issue in Singapore

the numbers rising dramatically in recent years. The way one deals with money on a daily basis can impact one’s life for many years to come. We can show you that sound financial practices do not always require "doing without, or giving up." If in doubt or faced with debt difficulties, no matter what the reasons for getting into debts may be, We Can Help You!

1) What are the interest rates moneylenders can charge?

From 1 June 2012 onwards, moneylenders are required to compute and disclose to you the Effective Interest Rate of the loan, before the loan is granted. If your annual income is less than $30,000, the interest rate which moneylenders can charge, for both secured and unsecured loans, is capped at:
• 13 per cent Effective Interest Rate for secured loans; and
• 20 per cent Effective Interest rate for unsecured loans.
The Effective Interest Rate takes into account the compounding effect of the frequency of instalments over a one-year period. This means that Effective Interest Rate better reflects the actual cost of borrowing over a one-year period. Visit www.ipto.gov.sg to find out more about how the Effective Interest Rate is calculated from 1 June 2012. If your annual income is $30,000 or more, the caps above are not applicable and interest rate is to be agreed upon between the moneylender and the borrower.

2) What are the fees that moneylenders can charge?

From 1 June 2012 onwards, moneylenders are only permitted to charge six types of fees:
• For each occasion of late repayment of principal or interest;
• For each occasion the terms of the loan contract are varied at your request;
• For each dishonoured cheque issued by you;
• For each unsuccessful GIRO deduction from a bank account, as payment to the moneylender;
• For early redemption of the loan or early termination of the contract; and
• Legal costs incurred for the recovery of the loan.
Any other fees are not permitted, and are hence not enforceable by the moneylender.

3) How do I know whether a moneylender is licensed or not?

Do not borrow from unlicensed moneylenders. Verify that a moneylender is licensed by checking the list of licensed moneylenders at www.ipto.gov.sg. Notwithstanding that the moneylenders are licensed, be mindful if they:
• Use abusive language, or behave in a threatening manner towards you.
• Ask for your SingPass user ID and/or password.
• Retain your NRIC card or any other personal ID documents (e.g. driver’s licence, passport, work permit, employment pass or ATM card).
• Ask you to sign on a blank or incomplete Note of Contract for the loan.
• Grant you a loan without giving you a copy of the Note of contract for the loan and/or without properly explaining to you all the terms and conditions.
• Grant you a loan without exercising due diligence (e.g. approving a loan over the phone, SMS or email before even receiving your loan application form and supporting documents, such as  the income tax assessment and payslips).
• Withhold any part of your principal loan amount for any reason. Such practices are not acceptable. If you encounter them, you should report the moneylender to the
Registry of Moneylenders, with information such as the moneylender’s business name, licence and contact numbers. Please see Question 10 for more details.

4) How can I tell whether an advertisement is from a licensed moneylender or an unlicensed moneylender?

Under the advertising directions, which took effect on 1 November 2011, licensed moneylenders are permitted to advertise only through these three channels: (a) business or consumer directories (in print or online media); (b) websites belonging to the moneylender; and (c) advertisements placed within or on the exterior of the moneylender’s business premises. All other channels are prohibited. In this regard, the advertising directions can help you differentiate between licensed and unlicensed moneylenders. If you receive flyers, SMSes, emails or other forms of advertisements which are not permitted under the directions, these would be from either licensed moneylenders operating in violation of the directions, or loansharks. Hence, you are advised not to respond to such advertisements. Instead, you should report the advertisements to the Registry at Tel: 6325 2585 or email: ipto_romp@ipto.gov.sg. Errant licensed moneylenders will be investigated by the Registry and loansharks will be investigated by the Police.

5) Can I rely on the content of an advertisement to take up a loan from a moneylender?

You are advised to seek clarifications on specific terms of the loan contract before signing up with alicensed moneylender, and not to rely solely on the content of advertisements from the moneylender.

6) In the event that I am standing as a surety for a loan, what should I look out for?

You should ensure that:
• You understand your responsibilities as a surety;
• You receive a copy of the Note of Contract at the time that the loan is granted to the borrower;
• The moneylender has explained the terms in the Note of Contact in a language that you understand; and
• The moneylender does not keep your NRIC card or any other personal ID documents (e.g. driver’s licence, passport).
• The moneylender does not acquire any information that contains passwords to your user accounts (e.g. Singpass account, Internet banking account, email account).

7) What should I do after being granted a loan?

• Make sure the moneylender delivers to you the full principal amount of the loan as stipulated in the Note of Contract, there should be no instalments or fees deducted up-front.
• Pay the loan instalments on time to avoid incurring late payment fees and late interest. • Make sure the moneylender issues to you a dated and signed receipt every time you repay your loan or pay any fees in cash, and check it for correctness (e.g. name, amount, date).
• Make sure you receive a statement of account for all your loan(s) at least once every 6 months, and check it for correctness (e.g. name, amount, date); and
• You should retain all statement of accounts and receipts of payments, as documentation and evidence of payments.

18) How do I lodge a complaint against a moneylender against unfair practices and/or contract?

• You can contact the Registry at Tel: 6325 2585 or email: ipto_romp@ipto.gov.sg.
• Rest assured that the Registry will not disclose your details to the moneylender without your consent. To facilitate the Registry to investigate your complaint, you may need to attend an interview with our officers and provide us with all relevant information and documents related to your loan transactions and circumstances of your dealings with the moneylender. The Registry views complaints against moneylenders seriously and will investigate them thoroughly. Errant moneylenders will be taken to task.
• If a moneylender has engaged in an unfair practice towards you, you can pursue the matter through the Small Claims Tribunal or the Court under the Consumer Protection (Fair Trading) Act. The Court also has the power to set aside loan transactions that are exorbitant or substantially unfair.