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Extension of protections for borrowers of licensed moneylenders to foreigners residing in Singapore

Foreign manpower
  1. Today, the Ministry of Law (MinLaw) announced plans to extend the aggregate loan caps and the self-exclusion framework for borrowing from licensed moneylenders for Singapore Citizens (SCs) and Permanent Residents (PRs) to all foreigners residing in Singapore1, to better protect them and their employers from the effects of over-borrowing. To complement these measures, the Ministry of Manpower (MOM) will impose administrative penalties on foreign work pass holders who borrow from unlicensed moneylenders. MOM and the Police will also step up their education efforts for foreign work pass holders on the risks of borrowing.

    Extending Protections for Borrowers of Licensed Moneylenders

  2. Currently, the Moneylenders Rules limit the amount of unsecured credit any single licensed moneylender may lend to any SCs or PRs. In January 2018, MinLaw announced amendments to the Moneylenders Act to introduce aggregate loan caps to better protect borrowers while allowing for reasonable and safe access to licensed moneylending credit. The caps, which will be implemented in 4Q 2018, are:
    (a) Individuals earning up to $20,000 a year may borrow up to $3,000 from all moneylenders combined; and
    (b) All other individuals may borrow up to six times of monthly income from all moneylenders combined.
  3. Since January 2018, MinLaw has been working with the Moneylenders Credit Bureau (MLCB), the industry, and Voluntary Welfare Organisations (VWOs) to prepare for the changes. This includes developing a self-exclusion framework to help individuals regulate their own borrowing and take part in debt assistance schemes.
  4. At the same time, MinLaw and MOM observed an increase in the number of foreigners borrowing from licensed moneylenders in recent times, from 7,500 in 2016 to 35,000 in the first half of 2018 alone. The Police also observed more foreigners residing in Singapore borrowing from unlicensed moneylenders.

    Extension of Aggregate Loan Cap to Foreigners Residing in Singapore

  5. To better protect foreigners residing in Singapore, MinLaw will extend the aggregate loan caps for borrowing from licensed moneylenders, to these foreigners. We will also impose a lower aggregate loan cap of $1,500 for all foreigners residing in Singapore who earn less than $10,000 annually. The following aggregate loan caps will apply:

    Borrower’s annual income Aggregate loan cap for SCs/PRs (announced in January 2018) Aggregate loan caps for foreigners residing in Singapore (new)
    Less than $10,000 (new) $3,000 $1,500
    At least $10,000 and less than $20,000 $3,000 $3,000
    At least $20,000 6x monthly income 6x monthly income

    Facilitating Self-Exclusion from Borrowing

  6. MinLaw will be introducing a self-exclusion framework which will prohibit licensed moneylenders from lending to SC/PRs who have applied for self-exclusion.2 This framework will help borrowers regulate their borrowing behaviour, and participate in debt assistance schemes which typically require self-exclusion. The self-exclusion framework will also be made available to foreigners residing in Singapore.

    Other Existing Protections under the Licensed Moneylending Regime

  7. Other borrower protections under the licensed moneylending regime already apply across the licensed moneylending industry. These include restrictions on advertising3, borrowing cost caps4, and mandatory credit report checks prior to granting any moneylending loan5.

    Curbing Borrowing from Unlicensed Moneylenders and Education Efforts

  8. To complement the changes to the licensed moneylending regime, MOM will impose administrative penalties on foreign work pass holders who borrow from unlicensed moneylenders. When a work pass holder has been found to have borrowed from unlicensed moneylenders, MOM will inform the employer and revoke the work pass. The foreign worker will then be repatriated and debarred from further employment in Singapore. Appeals by employers to retain their foreign worker will be considered on a case-by-case basis.
  9. MOM and the Police will continue to step up education efforts on money management and the risks of borrowing from moneylenders, for work pass holders and their employers. Existing education channels include the Settling-In-Programme for all first-time non-Malaysian Work Permit Holders6. MOM will also work with employment agencies and employers to inform their foreign workers of the implications of borrowing from unlicensed moneylenders.
  10. Work pass holders who face financial difficulties can approach existing support channels such as VWOs, the Migrant Worker’s Centre or the Centre for Domestic Employees, for advice and assistance.

    Implementation Timeline

  11. MinLaw will implement the extension of the aggregate loan caps to foreigners residing in Singapore in 4Q 2018, together with the aggregate loan caps for SC/PRs. MinLaw and MOM will implement the other changes (the self-exclusion framework for foreigners residing in Singapore, and debarment from new employment for work pass holders who borrow from unlicensed moneylenders) in 2019.

FOOTNOTE

  1. The borrower protections will apply to foreigners who are holders of Work Passes, Long Term Visit Passes, Short Term Visit Passes, Dependant’s Passes, and Student Passes. They will not apply to foreigners with a temporary presence in Singapore, such as tourists.
  2. Applications can be submitted online to the MLCB. An individual’s self-excluded status will be displayed in credit reports that licensed moneylenders are required to retrieve before issuing any loan.
  3. The Registrar’s Directions on Advertising and Marketing permit licensed moneylenders to advertise only on their own storefronts, on their own websites, or in consumer and business directories. Advertising to members of the public via SMS messages and telephone calls, social media and video hosting sites, or online advertisements is not allowed. Licensed moneylenders are also specifically prohibited from misrepresenting their products to potential borrowers.
  4. The Moneylenders Rules permit the following interest and fees on any moneylending loan to an individual: (i) 10% administrative fee; (ii) 4% interest per month; (iii) 4% late interest per month; and (iv) $60 late fee per month. In addition, the sum of all permitted borrowing costs on any individual loan must not exceed 100% of the loan principal. Licensed moneylenders are not allowed to impose interest and fees other than those permitted.
  5. The Moneylenders (Amendment) Act commencing in 4Q 2018 will require all licensed moneylenders to retrieve a loan applicant’s credit report from the designated credit bureau before granting any loan (under section 30N of the amended Act).
  6. Since 2012, all first-time foreign domestic workers are required to attend a one-day Settling-In-Programme (SIP). The SIP for new non-domestic and non-Malaysian work permit holders will commence from 5 October 2018 starting with the construction sector, and progressively expand to other sectors.