Oral Answer by SMS Assoc Prof Ho Peng Kee to Parliamentary Question on Licensed Moneylenders
19 May 2010 Posted in Parliamentary speeches and responses
Mdm Halimah Yacob, Member of Parliament, Jurong GRC
To ask the Minister for Law (a) how many licensed moneylenders were there in 2009 compared to 2008; (b) how much did they lend last year compared to 2008; (c) since the Moneylenders Act was last amended, whether small borrowers are now better protected; and (d) with the lifting of the interest rate caps for loans above $3,000, how does the Ministry ensure that moneylenders do not charge small borrowers excessive or unconscionable rates.
At the end of 2008 and 2009, there were 173 and 221 licensed moneylenders respectively. Last year, licensed moneylenders granted $288.8m in loans, compared to $188.5m in 2008.
We had amended the Moneylenders Act in November 2008 to put in place additional safeguards to protect borrowers. These amendments took effect on 1 March last year. Before I list some of the key safeguards, I should first make the point that borrowers who have an annual salary of less than $20,000 may take up unsecured personal loans of up to $3,000 only, where the interest rates are capped at 18 per cent per annum.
As to the safeguards, firstly, before granting a loan, the moneylender must inform the borrower of all the terms and conditions of the loan in a language he understands. The intent is to enable borrowers to understand the offer and make an informed choice. This information includes the interest rate charged, expressed as a percentage per annum; how the interest is calculated, and all other charges, such as administrative fees or late payment charges. Secondly, the moneylender is required to give the borrower a copy of the loan contract and provide half-yearly statements of account. These statements must contain details such as the principal, interest and fees outstanding; amount of interest and fees payable and their due dates as well as past payments broken down into repayment of principal and payment of interest and fees, if any.
Let me emphasise that borrowers have a right to ask, and indeed should ask, the moneylender to explain all the fees. They should also compare interest rates offered by different moneylenders. In the situation cited by Mdm Halimah Yacob where the interest or late interest charged is excessive and the borrower finds the transaction substantially unfair, he can file a claim in the Small Claims Tribunal or the Court, under the Consumer Protection (Fair Trading) Act. The borrower can also lodge a complaint with the Registry of Moneylenders.
The amendments to the Moneylenders Act also enhanced the investigative and regulatory powers of the Registrar of Moneylenders and introduced a range of enforcement tools to deal with errant moneylenders. Indeed, the Registry of Moneylenders has invoked these powers to deal with errant licensed moneylenders in breach of the requirements I had mentioned earlier by, for example, not renewing their licences. Such breaches include the inability to produce to the Registry the Notes of Contracts showing the borrower’s acknowledgement that the moneylender has explained the terms and conditions to him, as well as failing to issue receipts for cash payments. If the Registry determines that a moneylender has given loans under false pretences, for instance, where he had falsely declared a loan to be a business loan, the Registry will not hesitate to take stern action against the moneylender, such as revoking or suspending his licence. The moneylender may also be prosecuted. If convicted, he can be fined up to $30,000 or imprisoned up to 12 months or both. Likewise, if convicted of making false representations to induce borrowers to borrow money or agree to the terms of a loan, the licensed moneylender can be fined up to $40,000 or imprisoned up to two years or both. To ensure that lenders conduct themselves properly, Registry officers can and indeed have made surprise checks on moneylenders’ premises.
Let me assure Madam Halimah that the Registry of Moneylenders will continue to monitor the situation closely.
Last updated on 25 Nov 2012