The best thing about living in Singapore is having access to the best private and public services and facilities. However, even if a moneylending service appears legitimate or their respective website, scammers might be running them behind the scenes.
How Unlicensed Moneylending Led Many Customers Astray
In 2017 alone, the Singapore Police Force cracked down on unlicensed moneylending. This led to a 21.8% drop in illicit moneylending in the country. However, there’s more to do if the country intends to stop the illicit number of moneylending scammers. After the crackdowns, they’ve changed their strategy.
Instead of confronting their borrowers with threats and actual harassment, they’re harnessing the Internet through unsolicited calls and text messages, online shaming, and sending harassment notices in mail pigeon boxes.
The Typical Strategy of an Unlicensed Moneylender
• Bad Credit Score
Most unlicensed moneylenders target individuals that have bad credit scores with traditional banks. By investigating the lifestyle and perceived financial situation of their targets, they position themselves as a convenience.
True enough, with the convincingly easy way to gain loan approval when working with unlicensed moneylenders, most people strapped for cash — including foreign workers — take the chance.
Because the approved financing is unsecured with any collateral or credit scores and outside the jurisdiction of the Singapore Ministry of Law, unlicensed moneylenders can set their own interest rates, rules, and even change these aspects without warning.
Even if a borrower can repay their regular monthly repayments, they can still incur great debt. For example: if the unlicensed moneylender decides to change the interest rates, regular monthly payment amounts, or overall payment agreement, then borrowers can accumulate huge debt without any legal recourse against their lenders.
In addition, they have no quick defence against the harassment tactics of unlicensed lenders. There have been many cases of unlicensed moneylenders having splashed red paint and posting debtor notes outside borrower’s units.
In some cases, they’ve even posted the real names and addresses of people indebted to them online including the amount they owe the companies.
True enough, Singapore’s police have no tolerance for an unlicensed moneylender’s harassment tactics. However, it will take them some time to investigate and deliver justice for victims because the unlicensed moneylenders aren’t in the Ministry of Law’s registry.
All loan shark harassment will receive a huge fine of S$5,000-S$50,000 inclusive of a maximum of 5-year imprisonment.
• No Verification and Documentation
In this light, the best way to avoid unlicensed moneylenders is to remain vigilant and don’t go for offers that seem too good to be true. For example, being offered a five-digit loan amount without any identity verification and credit check needed is a deal that’s too unreal and is likely run by a loan shark or scammer.
How can you avoid working with illicit moneylenders? Here are 10 important things you should always remember.
How to Know if You’re Working with Legitimate Moneylenders
Search the Ministry of Law Moneylender Database
As we mentioned earlier, Singapore’s private and public facilities are state-of-the-art. With its Freedom of Information law fully implemented in the country, anyone can access the database of regulating bodies to find its members. The Ministry of Law is the primary regulator of the moneylending industry and moneylenders in Singapore, which goes without saying is a complex responsibility.
The Ministry of Law’s Registry of Moneylenders is readily accessible for any borrower wanting to do some research before applying. In fact, it encourages borrowers to learn more about their prospective moneylender licensure, activities, and other important details.
The Registry of Moneylenders
Singapore’s Registry of Moneylenders readily offers its entire list of registered moneylenders for a specific year. Often, moneylenders legitimately operating in the market are part of the list readily available from the registry.
As of 2019, there are over 156 Singaporean moneylending companies legitimately operating with proper licensure entirely overseen and monitored by the Registry of Moneylenders and the Ministry of Law itself. This is the first part of your journey to finding reliable moneylenders — if your moneylender isn’t on this list, then it’s important to find another one you can work with.
Follows The Smallest Nuances of Law and Regulation
A license does not guarantee your moneylender will always act in good faith. However, it binds them to the rule of law that any act they commit against the laws they swore to obey before they began will leave them penalised or punished in the process.
A moneylender can begin legitimate operations if they perform the following:
• Register Sole Proprietorship
Moneylending business owners are always Singaporean. In addition, their sole business proprietorship clarifies they are a moneylending business entity, which renders their business valid.
• Apply for a License
Before they can begin to lend money, moneylenders have to register and apply for a license to lend money. This verifies that the moneylenders are Singaporeans, of good character, are fit to lend money/ engage in moneylending businesses, and swear themselves within the Moneylender’s Act and its rules.
• Take the Moneylender’s Test
This test proves whether or not the sole proprietor and applicant has the skills and aptitude to maintain and grow a moneylending business, understands the responsibilities involved in running the said business, and whether they will likely follow or disobey the existing regulation rules.
Has a Registered Physical Branch
The Ministry of Law will only permit moneylenders to operate if they have a physical place of business. The place of business or businesses (if the moneylender plans to have multiple branches) must only conduct transactions in their physical branches.
All moneylenders are required to contact the Registry of Moneylenders if they plan to establish branches anywhere in Singapore. The decision on these new branches is subject to the registry’s decision.
However, all moneylenders must only have one principal place of business wherein many of its intensive and confidential activities will take place.
Therefore, any moneylender without a registered branch and only uses an online facility or even social network account for any transaction is illegal and are likely scammers. Therefore, don’t be fooled by the convenience they offer to you.
Transparency in Terms of Loan Contract Presentation
All legitimate moneylenders have a responsibility to present the terms and conditions of their loan in a way that customers can understand. The lender must sign the contract and confirmation that they have fully understood and took in detail everything about the contract as their moneylenders have explained.
It is the moneylender’s responsibility to explain several financial and contractual terms in simple terms to ensure their customer fully understands what they need to fulfill to avoid any additional interest rates or penalty fees during the repayment period.
Thanks to the presence and requirement of having an explanation contract, you can ask anything to your legitimate and trustworthy moneylenders and they will give you a substantial and clarifying answer. If they fail to do so, the Ministry of law can act on your behalf.
Income-Based Borrowing Amounts
Legitimate moneylenders always have your best interests at heart. Unlicensed moneylenders will always approve any amount without considering the borrower’s capacity to repay the regular payment amount and interest rates.
In addition, legitimate moneylenders will always follow the guidelines of the Ministry of Law when it comes to income-based borrowing.
According to the Ministry, a maximum of S$3,000 is the amount a borrower can receive if they have an income below $20,000 annual income. For those who have an annual income more than $20,000, , they can borrow an amount six times their monthly income.
With these safeguards in place, anyone working with licensed moneylenders will have an option to reconcile debt effectively without amassing a huge, problematic amount in the process.
A Tangible and Legitimate Contract
All moneylenders in the Registry of Moneylenders work within a solid and legally-recognized contract. This contract is tangible because it only gains approval once signees give their approval and signatures to solidify the agreement.
Unlicensed moneylenders will never present any contract — and if they do, it’s often something they can quickly change because no regulating organisations such as the Singapore Ministry of Law recognizes and hovers over their shoulders.
All tangible and legitimate moneylending contracts will always contain important information about the financing such as the followed interest rate (and annual percentage rate where applicable), regular repayment period, late payment fees, and repayment options.
Therefore, if the moneylender ever tries to change any of these details, they will face immediate action from the Singapore Ministry of Law upon a victim’s report.
Charges Only Three Kinds of Fees
According to the Ministry of Law, SG moneylenders can only impose three types of fees, which they must explicitly indicate in any contract they present to borrowers.
Legitimate moneylenders must present the late payment fee, upfront service fee, and legal fees in the contract and every receipt once they approve the borrower’s loan application and release the funds.
Borrowers receive late payment fees when the customer has already missed their first loan repayment.
Moneylenders can only charge up to S$60 per month for late repayment fees.
Upfront service fees are legitimate only if it is 10% of the borrowed amount’s total value.
Contesting moneylender policies or violations without strong evidence that leads to a court case will have borrowers shoulder the total cost of the legal proceedings.
Dependable As Per Their Customer’s Reviews
With all qualifications and licensure requirements aside, all licensed moneylenders are considerably trustworthy. However, it is not a guarantee that their services will remain top-notch. Careful research in their activities and the value they provide customers still remains necessary to find a licensed but trustworthy and results-oriented moneylender.
Review websites such as Money Lender Review and LoanAdvisor offer in-depth reviews about existing registered and licensed moneylenders in the country. Reviews are exceptionally helpful for foreigners who have zero idea on which moneylender to trust when it comes to their financial needs. Lastly, moneylender awards and recognitions are definitely great indicators of their trustworthiness and reliability.
Welcomes Loan Applicants From All Walks of Life
It’s easy to find moneylenders thanks to search engines, social media referrals, and review websites. However, some moneylenders only restrict themselves to a certain audience.
However, reliable moneylenders do not discriminate against Singaporeans or foreigners looking for fair and reliable financing whether for personal recreational use, investing, or just to pay for their initial rental fees (which is especially important for foreign workers moving into the country).
While moneylenders have different requirements for foreign loan applicants because of credit survey limitations, they only ask for additional requirements for this reason.
It is not because foreign workers have less income than Singaporeans but because the moneylender has to ascertain whether the foreign applicant has the means to repay and nurture their financing and avoid landing themselves in deep debt.
Make Sure You’re Working With Dependable SG Moneylenders
With more than a hundred moneylenders available in Singapore, it is wise for Singaporeans to work with Ministry of Law approved and regulated moneylenders.
True enough, you might find hundreds of moneylenders in social media and the Internet. In some cases, you might find personal referrals to seemingly-reliable people and organisations who are unlicensed moneylenders that grant a huge amount in exchange for a small interest rate.
Working with regulated moneylenders gives you legal backing in case they violate certain rules and regulations.
With unlicensed moneylenders, you have no receipts regarding the interest rate and agreement you had with your lender. The law cannot protect you, and you are left at the mercy of the moneylender when it comes to repaying your dues.
To sum it all up, to know you’re working with a legitimate, licensed moneylender, they have to have the following:
- Part of the Ministry of Law’s Registry of Moneylenders
- Has applied for and obtained a license by taking the necessary examination for moneylending services
- Has one principal place of business
- Fair and transparent in all their transactions, interest rates, and others
- Binds you to a legally-recognised contract that you and they have agreed to follow
- Charges only three types of loan fees
- Ensures you can repay your borrowed amount based on your income.