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In a joint press release on Thursday, the Ministry of Manpower (MOM) and the Ministry of Law (MinLaw) announced that the aggregate loan caps and the self-exclusion framework for borrowing from licensed moneylenders for Singapore Citizens (SCs) and Permanent Residents (PRs) will be extended to all foreigners residing in Singapore so as to better protect all affected parties from the effects of over-borrowing.
To complement these measures, it 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.
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 the fourth quarter 2018 are that the individuals earning up to $20,000 a year may borrow up to $3,000 from all moneylenders combined and all other individuals may borrow up to six times of monthly income from all moneylenders combined.
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.
At the same time, MinLaw and MOM shared that it 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.
To better protect foreigners residing in Singapore, MinLaw stated that it 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 ministries also said that other borrower protections under the licensed moneylending regime already apply across the licensed moneylending industry. These include restrictions on advertising, borrowing cost caps, and mandatory credit report checks prior to granting any moneylending loan.
To complement the changes to the licensed moneylending regime, MOM added that it 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, it added.
MOM states that 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.
MinLaw said that it 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 noted that it 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.