Money lending is a fast-growing business venture around the world. In Singapore, we have witnessed the number of licensed moneylenders rising steadily for the past years. With many players in the game, government regulations are paramount. In this article, you will get to know what the government demands of every licensed money lender in Singapore.
For regulation purposes and consumer protection, the government has put up minimum requirements for every licensed money lender in Singapore. Any moneylender in Singapore must meet the set threshold before being allowed to conduct the business.
In Singapore, according to the Moneylender’s Act amendments enacted on May 29, 2015, every licensed moneylender must:
1. Seek the Registrar’s Approval BeforE onboarding Company Assistants.
The government requires that every moneylender in Singapore must first seek the registrar’s approval before employing an assistant. This allows for the government to conduct a background check and scrutiny of the said applicants.
Since the goal is to maintain high standards within the money lending industry, this rule prevents applicants with a history of fraud and gross misconduct from infiltrating the money lending markets.
2. Obtain a borrower’s credit report before granting loans.
If you’re a licensed money lender in Singapore, obtaining your customer’s credit reports from the Money Lenders Bureau is crucial. The thing is, while money lending is highly profitable, it’s also a very risky venture to indulge in. What if a borrower defaults and applies for bankruptcy? This is one of the risks of this business. But, a lender can cushion themselves by adjusting a borrower’s interest rate to match their creditworthiness.
The credit report depicts the consumer’s creditworthiness and credit history. And since the lender is trying to mitigate risks, knowing a borrower’s credit score helps in determining the chances of the client adhering to the loan terms.
3. Submit Accurate Information of Borrowers to the Bureau and Give timely Updates Every Time the Borrower Repays their Loans
As a licensed money lender in Singapore, submitting relevant information about your borrowers is a must. This enables the bureau to compile the borrowers’ credit reports, and gauge their creditworthiness. This way, it becomes easy to impose correct rates on borrowers depending on their score.
4. Place a Cap on the Licensed Money Lenders Singapore Interest Rates
Did you know that the government forbids extortion of borrowers through high interest rates? Essentially, licensed money lenders Singapore interest rates cannot exceed 4%. This rule became active in October 2015. Regardless of the borrower’s credit score, income status, or employment situation, any lender who violates this rule risks having their license revoked.
Also, borrowers should be keen when going through a licensed money lender Singapore review. If the company charges interest rates that are higher than 4%, avoid working with them.
5. Inform the Borrowers on Terms of Loans Before Issuing the Loan
Every licensed moneylender in Singapore must inform the borrower of the loan terms, preferably by issuing a loan agreement contract before finalizing the process. They should make sure that the borrower fully understands and agrees with the specified terms provided before granting them the loan.
This ensures that there is transparency in the transactions and that both parties are conversant with the terms provided.
6. Must Issue a Statement of Account to the Borrower
A statement of account refers to a summary of all transactions between a lender and borrower. As a licensed lender in Singapore, you have a primary obligation to provide your clients with this document. Provision of the statement of account should commence on the first day of the contract until the final day. By displaying the transactions done by both parties, this document allows for transparency and easy tracking when disputes arise. Usually, it will contain transactions such as the amount of loan granted to the lender, the agreed installments payable, and the repayment period of the loan.
Generally, Singapore’s government is keen on regulating the money market and keeping loan sharks at bay. As a lender, non-compliance to any of the regulations stated above could make you lose your business license. Finally, before signing any loan contract, make sure you read the Ministry of Law’s licensed lender’s list, and that you read a relevant licensed money lenders Singapore review.