Remittance firms charging maids exorbitant interest fees on loans will be stopped, says MAS

MAS reviewed these loan practices after the Straits Times reported how Toast Me, a remittance licensee in Lucky Plaza, granted cash advances with interest to maids

Photo: You Tube screen grab from Nat Geo Films

To protect the interests of foreign domestic helpers, the Monetary Authority of Singapore (MAS) strongly prohibits remittance firms to continue providing loan services to these hapless domestic workers.

Such prohibition will be implemented beginning September 10, 2019. However, the rule will not cover existing loans, including restructured and refinancing loans.

“MAS continues to monitor the lending activities of remittance licensees closely, and will not hesitate to take further action where appropriate,” said a spokesman.

Based on a story released by Straits Times,┬áMAS reviewed these loan practices after it reported how Toast Me, a remittance licensee in Lucky Plaza, granted cash advances with interest to maids. A written agreement accessed by ST showed that the firm charged a maid 10% interest for a loan amount of S$700. Only S$630 was given to her after a “first-time fee of $70” was deducted.

Industry observers were vocal in saying that offering loans is an unusual service to be given by remittance firms because their primary role is to receive money for the purpose of transmitting it overseas. It is believed that these remittance firms have seen a loophole in the existing regulations thereby giving them the guts to exploit the situation of foreign domestic workers.

Statistics show that more foreigners are borrowing from licensed moneylenders, rising from 7,500 for the whole of 2016 to 35,000 in the first half of 2018.

Since new loan caps were introduced by the government to tighten money-lending rules to protect foreigners living and working here, borrowers felt compelled to turn to unlicensed sources of loans.

The prohibition notice was issued even before the new Payment Services Act comes into force. Under the upcoming Act, licensees offering payment services such as remittance will be prohibited from granting loans to individuals.

The existing Payment Systems (Oversight) Act and the Money-changing and Remittance Businesses Act will both be repealed when the new legislation takes effect next year.

Pastor Billy Lee, executive director of Blessed Grace Social Services, who has received distress calls from maids with multiple debts, said he has handled about 110 instances of maids who had taken loans from Toast Me. Some have lost their jobs here and were sent home as a result of “Toast’s aggressive collection tactics”, such as sending letters of demand addressed to their employers and continually harassing them with threatening text messages.

With the prohibition’s implementation, foreign domestic workers can breathe some fresh air and feel the ‘debt-belt’ finally loosening up.