The Registry of Moneylenders recently took note of some fraudulent practices by licensed lenders in Singapore, and consequently issued a new set of directions aimed at curbing the abuses. Mainly four types of abuses have been reported, and steps have been taken to address each type. This article series aim to make borrowers aware of the fraudulent practices and the actions taken to curb them.
If you have borrowed or planning to borrow from a licensed lender in Singapore, be wary of the following deceptive practices by the moneylender.
Some lenders may trick you into believing that there is a ‘new’ law that allows them to offer you weekly loans.
Registrar’s Directions – This is completely wrong. There is no such law, confirms The Registry of Moneylenders. In fact, any attempt to entice a borrower or offer them weekly loans by falsely saying about the so-called ‘new’ law, is a serious offence under section 27(a) of the Moneylenders Act, says The Registry of Moneylenders. If you fall prey to any such attempts or even know someone who is trying to manipulate the system in that way, you should report to the Registry of Moneylenders immediately.
If a licensed lender offers you a short-term loan of less than one month duration, be aware! The original intention behind offering you a short-term loan could be to roll over the existing loan repeatedly. They will refinance or renew your existing loan again and again, and will charge you a 10 percent administrative fee every time. Despite you paying an amount every month, your loan or interest will remain unpaid.
Registrar’s Directions: The Registry of Moneylenders warned the licensees to refrain from offering short-term loans to a borrower, when they suspect that the borrower may not be able to repay the principle loan amount, and as a result, may have to pay an administrative fee again and again, which would not help reduce the principle amount owed. The registrar has also suggested that the lender should check the borrower’s current income source and liabilities before granting a loan. The lender should not approve a loan application until they get satisfactory income proof from the applicant. For instance, if the borrower’s currently monthly income is less than the amount he is planning to borrow, the lender should decline the loan application.
The onus is on the borrower too. They should not accept a short-term loan, without knowing the repayment terms in details. The licensed moneylender should inform the borrower about the risks associated with non-payment or delay in payment. This should be done in writing, meaning the lender has to provide the borrower a written statement of caution, before granting the loan. A sample cautionary statement is available on the official website of The Registry of Moneylenders.
As a borrower, you should read and understand the guidelines, terms and conditions clearly before taking up a loan. Stay tuned for the next part of this article, where you’ll get to know about the other directions issued by the registrar.
To read our previous article, please click here.