SINGAPORE — The Ministry of Law (MinLaw) announced new restrictions on moneylending activities, particularly for low-income foreigners and work pass holders, in a press release published on Monday, July 15. The new loan cap has been decreased to S$500 from the previous S$1500, effective immediately.

MinLaw has put in place a comprehensive set of measures for moneylending by foreigners, domestic helpers and other work pass holders earning less than S$10,000 annually, in order to slow down the increase in moneylending activities, which has gone up exponentially over the last three years.

In the first six months of 2019 alone, MinLaw said that there were already 53,000 foreign borrowers who loaned from licensed moneylenders as compared to 55,000 borrowers in 2018, 19,000 borrowers in 2017, and 7,500 borrowers in 2016.

The restrictions on moneylending include a decrease of the aggregate loan cap for low-income foreigners, restrictions on the supply of loans by licensed moneylenders (LMLs) to foreigners, and new restrictions on LMLs’ advertising and lending practices.

The measures on moneylending for low-income foreigners and work pass holders by MinLaw will take immediate effect from July 16 (with the exception of the caps on supply, which will be effective from August 15) and are as follows:

Caps on the supply of unsecured loans to foreigners

Each licensed moneylender will only be allowed to lend to 300 foreigners and should not go beyond S$150,000 in outstanding loan principals to foreigners at any point in time, with the exception of loans already in existence. The moneylenders can only grant loans to a maximum of 15 foreign borrowers per month and 50 foreign borrowers per year, and licensed moneylenders who do not comply will no longer be allowed to loan to foreigners.

Decrease in the aggregate loan cap for low-income foreigners

The aggregate loan for low-income foreigners who bring in less than S$10,000 per year will be lowered from the current amount of S$1,500 to S$500. As the existing cap on borrowing cost is 100% of the loan principal, this keeps the maximum repayable amount to a more manageable S$1,000, lowering the risk of over-indebtedness.

Licensed moneylenders are prohibited from accepting foreigners as guarantors

Moving forward, licensed moneylenders are prohibited from allowing foreigners as guarantors, but foreign borrowers may continue to take up loans in their own names.

No more advertising aimed at work pass holders

In order to reduce the opportunity and visibility of easy credit to vulnerable work pass holders such as domestic helpers, licensed moneylenders are hereby disallowed from putting up such advertisements in their shop windows; e.g. “Domestic Helpers Are Welcome”. Existing restrictions which ban advertising and marketing through instant messaging or social media will continue to hold.

Unauthorised third parties not allowed to facilitate loans

Licensed moneylenders that allow loans arranged and brokered by unauthorised third parties will be penalised by MinLaw. Unauthorised third parties are defined as those working illegally without the proper work permits. Work pass holders who are found guilty of broking or facilitating loans for gains will be punished by the Ministry of Manpower (MOM) and will have their work passes revoked.

Licensed moneylenders are prohibited from cross-referring borrowers

In order to further reduce the visibility of credit to vulnerable work pass loaners, licensed moneylenders are prohibited from referring borrowers to other moneylenders. This will prevent any attempts to bypass the new supply caps.

Licensed moneylenders who breach any of the above restrictions or those in the Moneylenders Act will face appropriate penalties, to be executed by MinLaw.

MinLaw stated that borrowers with existing loans can continue to seek repayment support by asking moneylenders to negotiate debt repayment terms and can seek help to restructure their difficult-to-settle debts through a voluntary welfare organisation (VWO), the Migrant Workers’ Centre, or the Centre for Domestic Employees.

MOM will continue to provide support and education to work pass holders regarding how to effectively manage their finances, in order to reduce the need for loans in the first place, and will give advise to foreign domestic workers on the dangers of borrowing from unlicensed moneylenders so that they do not lose their employment in Singapore.

The police are also on the lookout for unlicensed moneylending syndicates and are ready to enforce rules and mete out penalties. /TISG