The first part of this article series touched upon two fraudulent practices by licensed moneylenders in Singapore and how The Registry of Moneylenders responded to those in their newly issued guidelines. There are two more practices that drew attention of the registrar. And they addressed those issues as well in their new guidelines. In this article, we take a look at the next two money lending practices in question.

The next two practices in question

As a potential borrower, you should be aware of the following deceptive practices by any moneylenders in Singapore.

Offering re-loans to borrowers already struggling to pay off their existing debts

Some lenders provide loans or re-loans to borrowers, who are already in debts. That way, they repeatedly charge a 10 percent administrative fee to the borrower. On the other hand, the borrower pays an amount every month, but it does not help repay the original loan amount and the interest, because the monthly amount collected from them goes into paying administrative fees, late fees, etc. If someone continues to pay administrative fees on re-loans instead of repaying the original loan – their total payment to the lender could exceed the principal loan amount after some time. Still, the debt on the borrower would remain the same.

Registrar’s Directions – The registrar clearly advised against granting any loans or re-loans to borrowers, who are already in debts. Any such act of lending would be considered a violation of the 11, 12 and 12A of the Moneylenders Rules, says the new guidelines. This could even result in cancellation of the moneylender’s license under section 7(1)(d)(v) or under section 9(1)(a)(iv) of the Moneylenders Act.

Splitting a single loan into several small loans to earn more late fees

Steps have been taken against this fraudulent practice as well. Some lenders split a single loan into multiple components. When the borrower fails to repay on time, the lender would impose a late fee of $60 on each component or split loan. That way, they earn more on late fees.

Registrar’s Directions – Under the new guidelines by The Registry of Moneylenders, licensed lenders have been advised not to split a loan, especially when they know that the borrower could fail to repay on time. If a lender splits a loan with the purpose of earning more late fees, it could result in cancellation of the lender’s license under section 9(1)(a)(iv) of the Moneylenders Act. The registrar may also refuse to renew the lender’s license under section 7(1)(d)(v) of the Moneylenders Act.

It is also a responsibility of the lender to make sure that the borrower reads and understands the rules about short-term loans and split loans. Failure to inform the borrower is also considered an offence under sections 19(1) and 19(2) of the Moneylenders Act. Before granting a loan, the lender must provide a written cautionary statement to the borrower. The cautionary statement must be written in a language that the borrower understands. The borrower must read and understand all the terms and conditions and must acknowledge that with a signature.