The Singapore Government has passed changes to the Moneylenders Act on January 8, 2018 to prevent people from drowning themselves in a mountain of debt. Law and Finance Senior State Minister, Indranee Rajah has proposed changes to laws regulating moneylenders in Singapore. Presently, how much people can borrow loan amount is capped by their income level but they still can borrow money from different money lenders in Singapore. The new changes to the Moneylenders Act will now stop borrowers from applying for a loan if they already have high monthly debt obligations.
What are the changes?
•The amended laws are expected to start from the 4th quarter of 2018.
•People who are earning under S$20,000 a year, they can borrow up to S$3,000 in total loans from all moneylenders combined.
•People who are earning at least S$20,000 a year, they can borrow loan amount up to the equivalent to six months’ salary.
•Any money lender in Singapore will not be able to offer loans to borrowers who have reached these loan limits.
•Previously, the government had set up the Moneylenders Credit Bureau in September 2015 along with restrictions on fees and interest rates that can be charged by moneylenders.
The Singaporean government has made changes to the Moneylenders Act because it wants to stop low-income borrowers from borrowing loans from illegal moneylenders. The number of borrowers and the outstanding loan amounts have been increasing over the past three years. The number of borrowers increased from 31,000 borrowers in 2014 to 40,000 last year. It has been found that 41,000 Singaporeans made use of payday loans in the first three quarters of 2017. Seeing these increasing figures, the government now aims to assist borrowers in managing their debts in order to ensure that this number does not grow.
What borrowers can do now?
There’s only one thing that borrowers can do once they reach their borrowing limit – clear their existing debt by paying bills on time, and then apply for a loan from a licensed moneylender in Singapore.
Tighter approval requirements on moneylending business
The government has also introduced changes to the Moneylenders Act aimed at improving the transparency and accountability in the moneylending business. Money lenders in Singapore will now have to incorporate themselves as companies. They must submit their audited accounts to the Registry of Moneylenders. They will have to follow tighter approval requirements before providing loans to borrowers while also keeping in mind the new loan limit set for borrowers.