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 ©The
Straits Times, Singapore (Used by permission)
by Carolyn Quek
Move to allow higher interest rates and advertising can help
combat loan-shark trade
LICENSED moneylenders welcome a recent government decision to lift several
longstanding restrictions on the industry, including caps on interest rates and
bans on advertising.
The changes, passed in Parliament on Tuesday, will offer more legitimacy to a
sector that has been stagnating for years, according to those in the field.
'Those who have never heard of us before can now go to the legal avenues instead
of illegal ones.'
Mr David Poh, president of the Moneylenders' Association of Singapore
... more
'Since time immemorial, us legal moneylenders have been put in a bad light,'
said Mr Peter Tan, who has been operating a business in the Golden Mile Complex
for 20 years.
'(The changes) go to show that we are doing a legalised business where we don't
have to hide under a cloak of darkness.'
For the last six decades, licensed moneylenders have faced several restrictions
designed to prevent them from taking advantage of desperate borrowers. The curbs
included caps on interest rates that ranged from 12 to 18 per cent, limits on
advertising and a ban on franchising.
But those restrictions were lifted on Tuesday and Senior Minister of State (Law
and Home Affairs) Ho Peng Kee said the move would help combat the mushrooming
loan-sharking trade.
'People with no or low income will, at certain points in time, need cash quickly
to meet an urgent or genuine need,' said Associate Professor Ho. 'It is my hope
that by establishing the moneylending industry in a modern setting, fewer people
will resort to borrowing from loan sharks.'
There are about 170 licensed moneylenders here; most are sole proprietors.
Their clients are mostly men between 30 and 50 who want small, short-term loans
to cover expenses such as hospital bills, wedding banquets, mortgages and,
sometimes, debts to loan sharks.
These moneylenders are also approached by small and medium-sized enterprises for
business loans.
The business, though, is not a licence to print money, they say.
Mr David Poh, president of Moneylenders' Association of Singapore, said many
businesses were forced to close as they could not survive on 'low' interest
rates.
Mr Tan, 59, said most clients do not put up collateral for loans, leaving
lenders drowning in red ink if they default. 'Sometimes they may come in with a
Rolex watch or jewellery, but it's very rare. Most of them have nothing to
pledge,' he said. Removing the limit on interest rates would now give them more
of a buffer against defaults.
The new laws that allow legal moneylenders to advertise will help customers
steer clear of loan sharks, said Mr Poh.
'Those who have never heard of us before can now go to the legal avenues instead
of illegal ones,' he said. The 54-year-old chairman of Wah Leong Company in
Jalan Besar said being able to operate from more than one location will make
things more convenient for clients.
Already, moneylenders say they are receiving more calls and walk-in clients.
But the moneylenders say this does not necessarily mean better business.
'Because times are bad, we are also going to encounter more defaulters,' said Mr
Tan.
The law will kick in once it has been published in the Government Gazette - the
State's official journal of laws and notices. That is expected to take place
soon.
The changes
THE new laws governing moneylending ease restrictions on
moneylenders and clarify the scope of the activity.
The Registrar of Moneylenders has been given more teeth while borrowers will
have more protection. The screws have also been tightened on loan sharks.
Here are some of the changes:
Easing of restrictions on moneylenders:
• They can now place advertisements but these must be accurate.
• They can operate branches.
• The previous interest-rate caps of 12 per cent a year for secured loans and 18
per cent for unsecured ones have been lifted. The caps apply only to personal
loans of below $3,000.
More powers for Registrar of Moneylenders, more protection for borrowers:
• The Registrar has more grounds to refuse, revoke or suspend a moneylender's
licence.
• Moneylenders must inform borrowers of the terms and conditions before granting
loans.
• A written contract must be drawn up in a language the borrower understands.
Tackling loan sharks:
• Those caught harassing debtors now stand to be caned.
• Wider net to catch those presumed to have helped in running an illegal
moneylender's business: Where previously, only the person whose bank account or
ATM card was used to collect debts was liable for punishment, now, even those
who use telecommunication services like cellphones or pagers will be liable.
'Those who have never heard of us before can now go to the legal avenues instead
of illegal ones.'
Mr David Poh, president of the Moneylenders' Association of Singapore
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