Legislative changes to enhance the regulatory framework for pawnbrokers
4 Nov 2014 Posted in Press releases
The Ministry of Law (MinLaw) has submitted one Bill for First Reading in Parliament. The Pawnbrokers Bill seeks to ensure that the regulation of pawnbrokers keeps pace with the industry’s evolving business practices and that pawners continue to have a safe environment to access credit.
MinLaw has also submitted six Bills for Second Reading. These are: the Constitution of the Republic of Singapore (Amendment) Bill; the Judges’ Remuneration (Amendment) Bill; the Legal Profession (Amendment) Bill; the Public Trustee (Amendment) Bill; the Statutes (Miscellaneous Amendments – Deputy Attorney-General) Bill and the Supreme Court of Judicature (Amendment) Bill.
Key Features of the Pawnbrokers Bill
- The Bill will propose the following changes to the regulatory framework:
- Removal of the existing auction system
The Bill will remove the need for pawnbrokers to dispose unredeemed pledges through public auctions. As the marketplace is competitive, this change should benefit pawners as pawnbrokers are likely to pass on the resultant cost savings. These may be in the form of lower interest rates or higher loan-to-valuation ratios for the pledges.
To protect pawners’ interests, pawnbrokers will be required to provide an indicative valuation of the pledge to the pawner at the point of pawning, as well as to provide a fresh indicative valuation to the pawner at the end of the redemption period. This will enhance transparency and enable pawners to make better-informed decisions.
- Tighter licensing requirements for pawnbrokers
The Act will impose statutory duties on pawnbrokers to maintain a minimum paid-up capital of $2 million for the first branch and $1 million for every subsequent branch, and to appoint an auditor to carry out annual audits of their business.
The security deposit which licensees are required to furnish will also be raised to $100,000, from the current $20,000. This is expected to enhance the pawnbrokers’ compliance with regulations.
- Enhanced processes in relation to pawn tickets
Pawners will no longer need to make a declaration with a Commissioner for Oaths to replace a lost or destroyed pawn ticket. They can now apply directly to the pawnbroker for issuance of a replacement pawn ticket.
A new provision will also be introduced to enable pawners to sell their pawn tickets to pawnbrokers, who are currently prohibited from purchasing them.
- Key consumer protection provisions
The interest rate will continue to be capped at 1.5 per cent per month. The minimum redemption period for pledges will also remain at six months.
If the pledge is lost or damaged, a new provision will require pawnbrokers to compensate pawners according to the pawnbroker’s valuation of the pledge at the point of pawning.
- Anti-money laundering and countering financing of terrorism measures
There will be new anti-money laundering measures as well as measures to counter the financing of terrorism imposed on pawnbrokers. These include the requirement to conduct Customer Due Diligence checks on pawners and to file reports on any suspicious transactions or circumstances.
- In reviewing the pawnbroking regime, MinLaw sought feedback on these features through a public consultation in 2013.
Last updated on 04 Nov 2014