Parliament No:13
Session No:1
Volume No:94
Sitting No:55
Sitting Date:08-01-2018
Section Name:Second Reading Bills
Title:Moneylenders (Amendment) Bill
MPs Speaking:The Senior Minister of State for Law (Ms Indranee Rajah) Ms Indranee Rajah The Senior Minister of State for Law (Ms Indranee Rajah), Mr Alex Yam (Marsiling-Yew Tee), Assoc Prof Daniel Goh Pei Siong (Non-Constituency Member), Assoc Prof Fatimah Lateef (Marine Parade), Er Dr Lee Bee Wah (Nee Soon), Mr Yee Chia Hsing (Chua Chu Kang), Dr Intan Azura Mokhtar (Ang Mo Kio), Mr Louis Ng Kok Kwang (Nee Soon), Mr Gan Thiam Poh (Ang Mo Kio), Mr Desmond Choo (Tampines), Mr Deputy Speaker, Mr Deputy Speaker

Moneylenders (Amendment) Bill

5.13 pm

Order for Second Reading read.

The Senior Minister of State for Law (Ms Indranee Rajah) (for the Minister for Law): Mr Deputy Speaker, on behalf of the Minister for Law, I beg to move, "That the Bill be now read a Second time."

Licensed moneylenders are tightly regulated under the Moneylenders Act as the industry caters to borrowers who tend to be more vulnerable. These borrowers often need short-term credit urgently, but cannot obtain it from financial institutions, possibly due to their level of income or credit history.

In regulating licensed moneylenders, the Ministry of Law seeks to maintain a balance in allowing individual borrowers reasonable access to credit from licensed sources, while ensuring that borrowers, particularly lower-income borrowers, are adequately protected.

The Advisory Committee on Moneylending (ACML) was convened in June 2014 to comprehensively review the regulatory regime for moneylending with these objectives in mind. The Committee issued its Final Report in May 2015 with 15 recommendations to MinLaw.

MinLaw accepted 12 of the Committee's 15 recommendations and has worked with the industry and voluntary welfare organisations (VWOs) to implement them progressively.

In 2015, we introduced stricter caps on borrowing costs.

In March 2016, we launched the Moneylenders Credit Bureau (MLCB), which facilitates better tracking and monitoring of unsecured loans. The MLCB provides up-to-date details of a borrower's creditworthiness and indebtedness, to enable moneylenders to make a more informed and responsible lending decision.

The Moneylenders (Amendment) Bill is the latest step in these efforts. Its key objectives are to: provide better protection for borrowers; strengthen the regulation of moneylenders; and professionalise the moneylending industry.

One key change introduced by clause 19 in this Bill is the aggregate loan cap. The Moneylenders Rules presently cap the amount of unsecured credit an individual may borrow from any single moneylender. However, there are borrowers who approach multiple moneylenders for loans and consequently may still become over-indebted despite the current restrictions. The proposed aggregate loan cap in the Bill addresses this issue. It sets an overall limit on the amount an individual can borrow from all licensed moneylenders, combined.

We intend to set an aggregate cap of $3,000 for individuals with an annual income below $20,000, and a cap of six times' the monthly income for all other individuals, as recommended by the ACML.

The aggregate loan cap is intended as a measure to prevent over-borrowing. The proportion which currently over-borrows is small. Between March 2016 and March 2017, less than 2% of Singaporean borrowers who took out loans have an outstanding balance exceeding the cap.

Even though only a small number of Singaporeans over-borrow today, they still need help with managing their debt. We also want to ensure that the numbers do not grow. MinLaw will work with VWOs and the moneylending industry to help such borrowers improve their situation. The Moneylenders Association of Singapore (MLAS) is also developing a more formalised framework, the Moneylenders Debt Restructuring Scheme, to complement existing debt assistance schemes run by VWOs. Details of this industry-led initiative will be announced by MLAS later this year.

Let me now take the House through the key amendments in the Bill.

First, better protection for borrowers.

To facilitate the implementation of the aggregate loan cap, clause 18 of the Bill introduces a new Part IIIA, which sets out the regulatory framework for the MLCB, and imposes new obligations on moneylenders.

The Bill introduces a new section 30N, which requires moneylenders to obtain a borrower’s credit report from the MLCB before granting any loan. Moneylenders will also be required to submit accurate borrower information to the MLCB and provide timely updates to the MLCB when borrowers repay their loans. Likewise, the Bill requires the MLCB to facilitate moneylenders’ requests for credit reports.

The Bill also requires the MLCB to protect the integrity, security, and confidentiality of any borrower information and credit reports in its possession, in addition to existing protections under the Personal Data Protection Act 2012.

The Bill introduces new provisions to allow the Registrar of Moneylenders (the Registrar) to exercise greater oversight on the MLCB. For example, the proposed section 30F will enable the Registrar to replace the MLCB operator under specific conditions, such as if the operator fails to satisfy its obligations under the Moneylenders Act; and the proposed section 30I gives the Registrar various powers to ensure the smooth and continued operation of the MLCB, especially in the event of a handover to another operator. Together, these amendments provide a stronger regulatory framework to provide individual borrowers with safer access to personal credit.

Next, the Bill also seeks to strengthen the regulation of the moneylending industry in three ways.

Firstly, the Bill will expand the powers of the Registrar of Moneylenders to exclude undesirable persons from the industry.

Presently, Part II of the Moneylenders Act empowers the Registrar to revoke, suspend, refuse to issue, or refuse to renew a moneylenders’ licence on a number of grounds. Specifically, sections 7(d) to (g) permit the Registrar to do so where he is not satisfied as to the qualification, experience, or character of an individual applicant. This is also applicable to a director, partner or substantial shareholder of a corporate applicant, or a person responsible for the management of the moneylending business. Clause 7 of the Bill expands the scope of this power to include persons who are presently employed or engaged, or whom a moneylender proposes to employ or engage, to assist in the business of moneylending.

Clause 10 also introduces a new section 11A, which provides that a moneylender must obtain the Registrar’s written approval before employing or engaging any assistant in its business of moneylending.

Presently, the Act requires that a moneylender obtain the Registrar’s approval as soon as practicable after someone has become a substantial shareholder or changes his substantial shareholding. Clause 11 of the Bill will require moneylenders to obtain this approval before the person becomes a substantial shareholder, or before any shareholder increases his substantial shareholding.

Existing approvals to engage in moneylending may be revoked if the Registrar discovers that any employee, director or substantial shareholder of the moneylender is not a fit and proper person or a person of good character. Failure to comply will also lead to enforcement and licensing action.

Secondly, to prevent moneylenders from circumventing present regulations by holding "spare licences" – which they can use if their original licences are revoked or suspended – clause 8 enables the Registrar to revoke or suspend a licence if the moneylender fails to commence its new business within 6 months of the issue of the licence. This will ensure that moneylenders holding licences today but who are not actively operating a moneylending business do not retain these licences.

Thirdly, the Bill will also strengthen the regulation of moneylenders by tightening the mandatory requirements on loan terms and contracts.

Presently, it is an offence for a moneylender to make any loan contract that does not truly state the principal or interest rate of the loan. Clause 12 expands the scope of this offence to include loan contracts that do not truly state the late interest rate or any permitted fees payable as well.

Under the current regime, borrowers are protected from onerous loan terms by existing caps on fees, interest and late interest. If a loan transaction is found by the Court to have breached these caps, the Court can re-open the transaction and the borrower may be relieved from excessive payments. However, it is currently not an offence if a moneylender breaches these caps. This is changed by clauses 13 and 14 of the Bill.

Under the Bill, it will be an offence for a moneylender to enter into a loan contract that breaches the caps on interest or late interest, which will be punishable by a fine of up to $20,000 and/or imprisonment of up to six months. The Bill also makes such a loan contract unenforceable, and any guarantee or money paid out by the moneylender under the contract will not be recoverable in any court of law.

The third area which the Bill touches on is the professionalisation of the moneylending industry.

Clause 6 of the Bill introduces a new section 6A, which requires that all licensed moneylenders be companies with a minimum paid-up capital not less than the prescribed amount. Following the recommendation of the ACML, this amount will be prescribed at $100,000. Today, nearly 70% of licensed moneylenders have already registered as companies.

Clause 17 of the Bill will also impose a new requirement on every moneylender to submit annual audited accounts to the Registrar. Audit requirements are not unusual and are presently imposed on many regulated entities across various sectors. Given the nature of the moneylending business, there is greater imperative for independent audit supervision.

Sir, over the last few years, the Government’s regulatory reforms have helped raise minimum standards and weed out bad business practices. Complaints against licensed moneylenders have dropped from 271 in 2012 to 104 in 2017, a reduction of more than 60%.

Going forward, MinLaw will complement these regulatory reforms with business-led initiatives to further professionalise the moneylending industry. We seek to encourage good business practices and better business models that can benefit borrowers. These include more effective methods of credit assessment to reduce default rates, more compassionate and responsive debt assistance schemes and more affordable terms of credit.

To encourage new business models, promulgate better business practices and spur improvements, MinLaw will explore lifting the current moratorium in a limited and controlled fashion, to allow a few new players with established track records in related financial areas to pilot new business models in the moneylending industry. We will release more details when ready.

Sir, in summary, the amendments to the legislative framework introduced in the Bill are important steps in helping us to better protect individual borrowers while allowing them to have reasonable access to credit. Sir, I beg to move.

Question proposed.

5.25 pm

Mr Alex Yam (Marsiling-Yew Tee): Mr Deputy Speaker, I rise to support the amendments to the Bill to better protect borrowers and also for closer regulation of the industry.

Many seek moneylenders over the banks because of their ease and convenience. Some do not qualify for bank loans and therefore resort to moneylending services for short-term credit. These people are often vulnerable and every effort must be taken to ensure that they know what they are getting themselves into. Education is timely and counselling in management of finances is perhaps important as the total outstanding amount in licensed moneylending and the number of borrowers is on the rise.

In 2016, it was tabulated that $367 million was borrowed by close to 40,000 borrowers. A year before that, the amount was $239 million for 35,000 borrowers. Although the proposed regulations will protect low-income families and prevent them from borrowing beyond their means, I wonder if our efforts to regulate the industry may also inadvertently push some of these borrowers into the outstretched arms of illegal moneylenders. This may lead to another set of issues.

As a Member of Parliament, I am sure many of us in this House have met families who have borrowed from illegal moneylenders and have their lives turned upside down. In my own town and our effort to drive home the message against illegal moneylending, our own branch office became a target of intimidation. As for licensed moneylenders, many of us have also come across a growing number of residents who are facing problems with their repayments.

Paying the principal amount borrowed, together with the interest, is enough to break many. Therefore, the new loan cap to protect borrowers especially from licensed moneylenders is of course a welcome one. No more hopping around moneylenders. We will not have a situation where Moneylender A will not know that Moneylender B is loaning the same amount to the same family.

The move to obtain credit reports before issuing a loan is perhaps long overdue, and this, taken in tandem with the measures undertaken by banks and credit card companies, will be welcomed. The Moneylenders Credit Bureau (MLCB) will act perhaps like a goalkeeper and verify lenders’ loan statuses before a loan is granted. But will the imposition of a nominal fee for the checking of records put off moneylenders from exercising due diligence, no matter how small the amount may be? What if they do not check the records and continue to issue loans more than the cap that is stipulated within the Act? Will the Registrar have the necessary powers to enforce that moneylenders fall in line and that they will have the power to take punitive and deterrent action against such errant moneylenders?

The call for regulation in this Bill is timely. Seeking the Registrar’s approval before employing assistants will enhance professionalism in the industry. Likewise, getting approval before increasing shareholding or becoming a shareholder will put the brakes on unsavoury characters entering into this industry.

We have about 160 licensed moneylenders in Singapore and more than 100 of them have registered themselves as companies, whereby they are required to submit annual audited accounts to the Registrar. I would, however, like to ask the Senior Minister of State what are the measures being taken to get the remaining one-third of moneylenders to comply and register? What if they do not comply? Will the Registrar also have the powers to get them to fall in line?

Accountability and transparency are the keywords of the amendments tabled in this Bill. But are those who are borrowing aware of the costs involved and consequences of getting a loan from the moneylenders? Will the moneylenders be required to advise them accordingly and will the Registrar ensure that they do?

As stated earlier, educating vulnerable groups, especially low-income families, of the pitfalls of failure to repay loans to moneylenders, are important. The O$P$ signs that were, perhaps, more common in the past, are fast becoming a thing of the past. But we still read of isolated cases of paint being splashed on doors and debtors being intimidated and even other debtors being forced to become runners for illegal moneylenders.

We must not be complacent in our Home Team efforts to crack down on illegal moneylending but it is also important that we regulate the legal and licensed moneylender industry to prevent any abuse.

It would, perhaps, be educational for Members present in this House if the Senior Minister of State could share with us if any studies have been conducted to ascertain the reasons as to why people borrow from moneylenders. What are the causes and what are the costs? What is the average amount borrowed and the interest rates levied? Are those interest rates explained to the borrower and are those rates acceptable to the borrower? Because many of them take loans perhaps in desperate situations and agree to almost everything under the sun.

Mr Deputy Speaker, there was a recent letter to the Straits Times Forum page on 10 November 2017 asking if “a loan facility administered by a government body could be implemented, which borrowers are likely to trust more and approach for assistance rather than private moneylenders?” The writer stated that “proposed restrictions will only drive more of those desperate for cash into the clutches of unlicensed moneylenders.” She goes on to suggest that Government-administered lending, combined with counselling rather than mere legislative changes to borrowing amounts will be more helpful.

I tend to agree with the counselling part but Government-administered lending is something I am not comfortable with. The onus is on the borrower to exercise due diligence and to ascertain if the loan required that is necessary. And if it is, will it be possible for them to repay the sum within the stipulated period? This is where the Government can perhaps lend a hand by making available counsellors who would advise people in need of their options. Perhaps a dedicated unit within the Registry would go a long way in advising people who would like to seek the services of a moneylender.

My last clarification has to do with debt recovery. I wish to ask the Ministry if there are acceptable standards of debt recovery that are set and how they are being policed. I have come across feedback that there are sometimes methods that border on criminal intimidation. How many moneylenders employ their own debt recovery agents and how many make use of third party debt recovery companies? How many cases of intimidation have been prosecuted or reported? While we also need to protect the interests of honest moneylenders dealing with difficult clients, we must also similarly ensure that less than scrupulous moneylenders do not intimidate vulnerable clients. Despite that, I support the Bill fully.

5.33 pm

Assoc Prof Daniel Goh Pei Siong (Non-Constituency Member): Deputy Speaker, Sir, the amendments proposed in the Bill aim to protect borrowers from over-borrowing and predatory moneylending practices. This aim is worthy of support. However, I am concerned the Government might be over-tightening the rules, making credit so inaccessible to individual borrowers that they are driven by desperation to unlicensed moneylenders. The main thrust of my speech is to ask that the Senior Minister of State allays this concern through the explanation of specific reasons and facts.

Deputy Speaker, Sir, since the Moneylenders Act was enacted, unlicensed moneylending has been brought under control from its heyday in 2009 of over 18,000 cases. The Minister updated this House in August 2016 that unlicensed moneylending cases fell to a 10-year low in 2015, at 4,862 cases. The number of people arrested for unlicensed moneylending activities also fell to around 1,500 in 2015 from close to 2,000 in 2011. This appears to be an achievement of tough enforcement combined with the licensing and regulation of legalised moneylending.

But just as loan sharking and illegal moneylending cases are declining to new lows, the Ministry set up an Advisory Committee on Moneylending to review the regulations and make recommendations. The Ministry accepted 12 of the 15 recommendations advised by the Committee and implemented them in late 2015. The most significant changes were borrowing caps based on income, caps on interest rates and fees and standardised loan contracts.

In principle, it is good for the Government to review regulations after a period of their operation to see what can be done better. But there is also a worry that the Ministry could be fixing something that is not broken. In fact, this something is not just not broken, it is working very well in tandem with strict enforcement against unlicensed moneylending. I would therefore like to ask the Senior Minister of State three questions to allay this worry.

First, while the logic of the tightening, such as pegging borrowing caps to income and caps on interest rates and fees, is hard to disagree with, it is also important that we look at hard data for evidence-based policy-making. Would the Minister please share with the House the number of unlicensed moneylending cases reported and the number of offenders arrested in 2016 and 2017? These numbers could tell us whether the 2015 tightening had the effect of pushing more borrowers to unlicensed moneylending.

Second, the proposed Bill will empower MinLaw to go further than the 2015 tightening, allowing the Ministry to set up an aggregate loan cap. In the 2015 tightening, borrowers could borrow up to the loan cap from each moneylender. With the further tightening allowed by the new regulatory framework, borrowers could borrow up to the loan cap from all moneylenders combined. This is quite a drastic tightening of credit. Would the Senior Minister of State please inform the House what are the new developments on borrowing, new data on moneylending trends that have led to this escalated tightening?

My third question follows from the first and the second questions, and is concerned with the balance of things, between protecting borrowers from over-borrowing and driving them to turn to unlicensed moneylenders. Would the Senior Minister of State please advise whether the Ministry has studied the probability that this further tightening would drive borrowers to turn to unlicensed moneylenders, and whether the Ministry has the monitoring tools to measure this possible effect?

Deputy Speaker, Sir, other than the main points above, I have four other minor points to raise for the Senior Minister of State to address.

First point. In the 2015 adoption of the Advisory Committee report, two of the recommendations were put on hold to be reviewed later. These are: one, the lifting of the moratorium on granting of new licenses so as to encourage competition and bring down interest rates; and, two, the creation of guidelines for debt-collecting practices so as to further professionalise the industry and distinguish it from unlicensed moneylenders. I would like to ask the Senior Minister of State whether these recommendations have been reviewed. If they have not been reviewed, whether she thinks it is timely to review them now, given the extensive makeover to prevent over-borrowing and to professionalise the industry.

Second point. One of the recommendations in the Advisory Committee report was that, while no recommendations were made in respect to the location of moneylenders in the heartland, the Committee advised that the Registry should monitor the situation and ensure that it is not aggravated. I would like to ask the Senior Minister of State whether and how the Registry has been monitoring the situation and whether the Registry decided that it is not currently aggravated.

A research policy report published by the Centre of Banking and Finance Law, at the Faculty of Law, National University of Singapore, in July 2015, shows that more than half of the licensed moneylenders were located in primarily residential areas rather than the commercial areas of town centres. There may be a case for the Ministry to commission a study using current geographical methods to determine whether location matters in encouraging unnecessary and excessive borrowing and thus whether or not the location of moneylenders should be regulated.

Third point. Would the Ministry look into working with the moneylending industry towards standardising loan products, with guidelines to advertise these products at their premises in a transparent manner? This will further professionalise the industry as well as better fulfil the 2015 recommendation to standardize loan contracts and practices. If I am not mistaken, standardisation is currently limited to the standard form used for contracts, which still allows for very flexible contracting terms within the interest rate and borrowing caps. Also, moneylenders have been innovating contracts to sustain predatory practices, and the Registry has been issuing directions and advisories with the burden placed on consumers to monitor and report. Standardisation will minimise such predatory practices.

Fourth and last point. Peer-to-peer lending platforms are on the rise around the world and is one exciting bright spot for innovation in fintech. There are some interesting P2P lending start-ups in Singapore such as Funding Societies from Indonesia and the local outfit Moolah Sense, linking up individual investors with SMEs.

As far as I know, there are no platforms, legal or otherwise, that are connecting individual borrowers with lenders. But there are risks associated with these potentially disruptive fintech innovations. After all, many individual borrowers could be borrowing from licensed moneylenders because they are shut out from mainstream credit facilities and need loans to manage their cash flow problems in their micro-enterprise business. Is the law currently adequate to tackle the potential issue of P2P lending platforms becoming de facto moneylenders in practice?

Deputy Speaker, Sir, as I mentioned at the start of my speech, I support the aim of this bill to protect borrowers from over-borrowing and from predatory moneylending practices. My concern is that in the pursuit of good intentions, the Government might be over-tightening, over-regulating, thus shutting out individual borrowers from access to credit lines and driving them to unlicensed moneylenders. This would greatly upset the balance between giving borrowers credit access and clamping down on loan sharks that has been hard won. I hope the Senior Minister of State would allay this concern. And with this caution, I support the Bill.

5.40 pm

Assoc Prof Fatimah Lateef (Marine Parade): Mr Deputy Speaker, moneylending in Singapore is a complex, diverse and challenging industry. Due to its unique nature, moneylending is relatively costly for off credit provision, if you think about it, especially when lending to individual small borrowers with low incomes. We need to also understand many small time borrowers are often caught in a desperate situation for funds and thus are vulnerable to exploitation by some moneylenders.

But beyond this, did you also know that moneylending is actually a very small part of the consumer credit market. It is often not even considered a mainstream financial service. It makes up less than 1% of overall consumer lending in Singapore. So, let us put that into perspective

In planning our handling of the issues related to moneylending, I feel it is important to maintain a well balanced approach. Whatever penalty regimen we are administering, we must bear in mind the spectrum of persons on the moneylending “food chain”.

In 2014, 2015 and 2016 the numbers of borrowers increased from 31,000 to 35,000 and 40,000 respectively. In the same three year span, the amount borrowed moved up from $239 million, to $282 million, to $367 million. It is indeed increasing significantly.

In planning and strategising for this industry the important necessary objectives we want should be:

(a) To prevent individuals from borrowing beyond their means,

(b) To stabilise the industry,

(c) To improve the rates of debt repayment from licensed lenders,

(d) To reduce and deter borrowing from unlicensed lenders,

(e) To professionalise, and increase the transparency and accountability throughout the industry.

In this sense, it is a welcome move to have the limits set as prescribed in this Bill and I support that. It is also stated that the Moneylenders Credit Bureau will check if borrowers have exceeded the limits. How will this be practically carried out? Who will help with monitoring and compliance?

Recently, a licensed moneylender saw me and shared this anecdote. I have informed the person of my sharing this in my speech today.

Two PRs borrowed money from this moneylender. They had their identity cards and passed the usual checks that needed to be carried out. Now, when it came to repayment, they did not comply. Thus as is usually done, the moneylenders will send debt collectors to their homes. Now, guess what happened? The person who opened the door told the debt collector that the two guys who were PRs, have never lived there and they were just using the address. And they are moving around. In fact, he went on to say that he, as Singapore citizen, had allowed the two men to use his name in support of their PR applications. He further elaborated to the debt collector that the two men had a track record of borrowing and then not being traceable and many had come to the house before. Thus he felt that this moneylending company will never get the money back.

The moneylender made a Police report giving all details present and available. However, the response from the Police came back that they had treated the case as closed. Being a bit disappointed, the moneylender came to see me and of course, made some representation, confided that it was not really about just getting back the money but more that it was the duty to highlight to the authorities that these two men were going around and cheating and still circulating.

Thus, there are gaps. We also need to know to prevent or reduce incidence like these in the market. We also do not want a situation whereby the tightening of rules is seen to force genuine moneylenders to exit the market and loan sharks to take over dominance. In fact, moneylenders can also tend to be at the mercy of some borrowers, who declare bankrupt readily when unable to repay.

In this Bill, it is also stated after dispensing the loans, moneylenders must update MLCB. Who is to have oversight of this? What if some people borrow from multiple lenders? It becomes even more complex. Therefore, it is a combination of borrowing from both licensed and unlicensed lenders to-date.

Sir, not all money lenders are bad guys and not all who borrow are bad people. As long as parties comply and play by the rules, the moneylending industry can enhance its image and professionalism.

Many people are looking to help regulate this area already. Work has been done by the Ministry of Law and by the Advisory Committee on Moneylending. One other group we need to nurture and train include mediators as well who I think can help in this industry, as mediation cases may tend to increase between the borrower and the lenders.

The challenge is now to create and have a moneylending system that recognises the need to adequately protect the vulnerable borrowers from the exploitative actions of some, whilst ensuring ongoing access to credit by people who really and truly have no access to alternatives and may then be tempted to enter the unsavoury world of illegal lending

In all, I support the Bill.

5.46 pm

Er Dr Lee Bee Wah (Nee Soon): Mr Deputy, Sir, moneylending is an issue as it is close to many MPs' hearts, as it is an issue that affects our constituents. We all know that going to borrow money is the only solution for some, albeit this is often a flawed one, because servicing the loan would sink the borrower deeper into the red. The slope is a slippery one: easy to fall into and hard to get out.

First of all, I support the introduction of a cap on loans from licensed moneylenders. It will hopefully prevent some people from borrowing way beyond their means.

Moneylending is a problem that has lingered for some time. A few years ago, I spoke about the loanshark problem and illegal moneylending in Singapore.

Thanks to Government intervention and great effort of police, loansharking activities appear to have abated, somewhat. But there will also be the issue of people needing to borrow money, and then over-borrowing. My only concern is whether this new cap will lead to even more underground moneylending activities and at even more cut-throat rates for desperate borrowers. Will the Government enhance the penalties for anyone caught operating an illegal moneylender joint? Will those reaching the cap be asked to attend credit counselling?

We have to nip the problem in the bud. Why are people getting into debt in the first place? These days, it is also very common to come across advertisements for "$0" upfront products. Yet, when you calculate the cost of the product as advertised upfront and the total sum of the instalments, there is a significant disparity.

One could purchase several expensive items without forking out a cent, only to realise months down the road that he or she is being saddled with bills that they cannot pay off. Should there be some restrictions on the way advertisements for hire purchases are presented?

Credit card debt is a serious problem in Singapore. In 2015, the Straits Times reported that 85,352 Singapore consumers have overdue unsecured debt totalling $288.4 million. The Credit Card Bureau also revealed that in the same year, the total number of delinquent debtors hit 101,493, a significant increase from just over 73,000 in 2011. The convenience of online shopping probably contributes to this trend.

Gambling addicts are another group of vulnerable people who often get caught in the never-ending spiral of borrowing and owing money. In 2015, the National Addiction Management Service (NAMS) reported a doubling in the number of gambling addicts seeking help since 2010. It is good news that more people are seeking avenues to quit their gambling addiction. I would call for closer cooperation between the National Council on Problem Gambling (NCPG) and registered moneylending firms, to help NCPG better identify and reach out to gambling addicts.

In light of the trends above, will the Ministry consider a widespread campaign about financial management and prudence, perhaps more education? And it has to start early. I would suggest that start as early as upper primary school. We should ingrain in our young minds to spend within your means as well as the ill of gambling because gambling is just like drugs, the moment they start to gamble, it can be addictive and difficult to get it off. I also have seen young graduates use credit card overdraft facilities in order to support their lifestyle which they cannot afford.

More awareness also needs to be drawn to the Credit Counselling Singapore programme, which aims to help individuals in debt through education, counselling and debt management. Sir, in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speeches.] Limiting the loan amount that the moneylenders can lend is a good thing. However, I am concerned that those who are desperate for money may turn to "ah longs" (loan sharks). The Government should pay attention to this trend and increase the penalty for "ah longs". We should also reflect why some people are mired in debts.

Nowadays, zero down-payment instalment plans and the convenience of online shopping have tempted many consumers to overspend. Statistics also have shown that there are more and more Singaporeans owing credit card debts, and more people are seeking help for gambling addiction. Hence, I hope the Government can step up education on financial prudence and management.

To address this issue, I think we should start from schools, even beginning from primary schools. We should let students know the ills of gambling and that they should never start on it. Because once you start gambling, you will be addicted and it is very difficult to get out of, just like drugs. In addition, we should also let every Singaporean know the importance of spending within his/her means.

(In English): I support the Bill.

5.53 pm

Mr Yee Chia Hsing (Chua Chu Kang): Mr Deputy Speaker, Sir, I rise in support of the Bill. Amongst other things, this Bill aims to restrict the amount people are able to borrow from licensed moneylenders, by introducing an aggregate loan cap depending on income levels. I believe this is a step in the right direction. Very often, the interest rates charged by moneylenders are already so high that borrowers struggle to repay one loan and then goes to more moneylenders to borrow to repay the initial loan, thus setting in motion a vicious circle ending in more financial trouble and possible bankruptcy.

However, I am also afraid that the proposed rules may cause borrowers to turn to unlicensed moneylenders.

Moreover, it is very difficult to prevent collaboration between licensed and unlicensed moneylenders. For example, a licensed moneylender possessing the contact details of a borrower could pass the contact information to unlicensed moneylenders, who may subsequently send messages promoting their easy loans. Most of the time, the recipients do not even know that these messages come from illegal moneylenders.

Mr Deputy Speaker, Sir, my concern is, how will the Government agencies monitor and ensure that the licensed moneylenders do not pass on customer information to unlicensed moneylenders? Some residents have feedback to me that they receive a lot of unsolicited SMS messages about such unsecured loans after they have approached legal moneylenders.

Moreover, an alarming aspect is some of the borrowers think that these messages come from licensed moneylenders and are well regulated when in fact, they are not.

I would also like to know if MHA is working with IMDA for mobile operators to disable any SIM cards which are used by illegal moneylenders.

Mr Deputy Speaker, Sir, while we focus on regulating licensed moneylenders, we should also tackle the issue of unlicensed moneylending and step up efforts to curb such activities. I hope the authorities can take into account the suggestions I have made. Thank you, Mr Deputy Speaker, Sir.

5.56 pm

Dr Intan Azura Mokhtar (Ang Mo Kio): Mr Deputy Speaker, Sir, thank you for the opportunity to speak on this amendment Bill.

I am heartened that the Government has strengthened our laws to ensure stricter controls and measures towards those who lend money and seek to reclaim their monies, as well as to ensure safety for those who borrow money. As Members of Parliament (MPs) in this House, many of us would have heard from residents their laments about harassment from loansharks and even licensed moneylenders. I support the Government's move to strengthen our Moneylenders Act through this amendment Bill.

To elaborate, I strongly support the insertion of section 11(A)(10). It is important to keep track of and monitor every employee or person who works for a company that lends money or entity whose core business is moneylending. There have been instances where moneylending companies have painted themselves to be run by thugs no different from loanshark syndicates.

I have met residents who have shared their nasty experience where the moneylender assistants or debt collectors from moneylending companies had acted aggressively when dealing with clients in debt collection, with threats and vulgarities hurled at the debtors when the debt could not be paid up immediately or in full as demanded. As moneylending companies are registered companies and the assistants or debt collectors are employees of these registered companies, there must be some form of decorum and sense of responsibility and respect in carrying out their duties even that of debt collection, in addition to having good moral character with no prior criminal records. These assistants or debt collectors who are employees of the moneylending companies must be trained, monitored and disciplined in the ethics of debt collection, not through aggression but by being firm yet respectful in retrieving the debts owed to the company. I am sure there could even be SkillsFuture courses on how such skills and ethics can be trained and nurtured for debt collectors.

I also support clauses 13 and 14 which make amendments to sections 22 and 22A respectively, where a cap is placed on the amount of interest imposed on the amount borrowed.

However, how do the moneylending companies, the Government or even employers monitor borrowers' record of borrowing, especially those of the employees? For the banks, there is the Credit Bureau Report that monitors borrowers' credit and record of borrowing, which can be accessed and shared by the banks and with employers. How can we ensure the borrowers themselves do not over-extend through borrowing excessively from different licensed moneylenders?

While section 30E makes provisions for a record of borrowing, similar to the Credit Bureau Report, to be made available for each borrower who borrows from moneylending companies, I do question why an approved moneylending company, which is still a private entity, is the one appointed to maintain such records of borrowers? Why is not a regulatory body overseen by the Ministry of Finance or the Monetary Authority of Singapore tasked to do so instead?

How much borrower information is collected and shared? The fact that this is a private company designated as a credit bureau, the issue of confidentiality and privacy is a concern for borrowers.

Will there be a sharing of such credit information of these borrowers among the different moneylending companies? On what platforms would such information be shared? And will such information be available under the Credit Bureau Report or made available to the banks or employers?

I look forward to the Ministry's clarifications on these questions I raise. Notwithstanding my concerns and questions, I support the amendment Bill.

5.59 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, I welcome the move by this Bill to professionalise the moneylending industry.

I have a few points to clarify on the wide-ranging powers and sensitive personal data that the Registrar and the Moneylenders Credit Bureau will possess, and the other methods for promoting responsible and safe lending.

One basis upon which an individual would be deemed unsuitable to take part in the moneylending business is where they had carried out moneylending business in a foreign country for which the licence has been withdrawn, cancelled or revoked by an authority in the foreign country.

While this is sound in principle, can I find out how enforcement of these provisions will look like in practice? How will the Ministry verify whether the individual has carried out any such moneylending businesses overseas? Does the Ministry have any plans to work with foreign authorities?

Next, the Registrar will have wide discretion to refuse or cancel approval granted for various applications under the amendments. Will the Registrar be providing reasons for refusing applications? What are the channels and grounds for appeal for someone whose application has been refused or cancelled?

Given that licensees and the Moneylenders Credit Bureau will possess sensitive borrowers' information, I am concerned about the security and confidentiality of the data. While the provisions impose duties on the use and disclosure of borrowers' information and duties to maintain confidentiality and security on licensees and the MLCB, I notice that licensees are not under the same obligation as the MLCB to notify the Registrar of events that compromise the confidentiality or security of its data.

Would there not be similar, if not greater, need for oversight over individual licensees who may not have the same technical ability as the MLCB in maintaining security arrangements? On the same note, will the Ministry be providing technical guidance to support licensees in protecting these sensitive data?

Next, can the Minister also clarify what duties a public agency that obtains borrowers' information and data under section 30ZC are under to protect that information? Would the information be available to anyone within the public agency, or only the individuals or departments requiring the information for policy formulation?

This is of concern especially because public agencies which are specified in the Personal Data Protection (Statutory Bodies) Notification 2013 are excluded from data protection obligations in the Personal Data Protection Act 2012. Instead, public agencies are subject to relevant internal government rules and sector-specific legislation as stated in the Personal Data Protection Commission’s website FAQ. What are these specific rules and duties public agencies are bound by when they obtain borrowers' information and data under section 30ZC, to protect that information? Would the information be available to anyone within the public agency or only to individuals or departments requiring that information for policy formulation? This is of concern, especially because public agencies which are specified in the Personal Data Protection (Statutory Boards) Notification 2013 are excluded from data protection obligations in the Personal Data Protection Act 2012. Instead, public agencies are subject to relevant internal Government rules and sector-specific legislation as stated in the Personal Data Protection Commission’s website FAQ. What are these specific rules and duties public agencies are bound by when they obtain borrowers' information and personal data under section 30ZC?

Given that the disclosure of information is only permissible for policy formulation or review, would it be necessary for the personal data to be in an individually identifiable form? Would it not be sufficient for the purposes of formulating broad policy for the data to be anonymised?

Next, in response to a call for feedback over Facebook, Mr Kane Tan highlighted the concern of moneylender advertising. Currently, moneylender advertising is regulated under directions issued by the Registrar of Moneylenders in addition to general requirements for all advertisements.

However, loan-shark advertisements through SMS messages remain common. Does the Ministry have plans to step up efforts to clamp down on such illegal advertising and to help the layperson distinguish between licensed and unlicensed moneylenders?

Such efforts must be appropriately targeted, recognising that that those who turn to loan sharks may have lower literacy skills. Awareness-raising must also dispel the false belief that only those who are involved in illegal activities like gambling or drugs turn to loan sharks when, in fact, "ordinary" people from all walks of life can be entangled with illegal moneylending.

Further, can the Minister clarify whether platforms that are not themselves moneylenders but connect people to other moneylenders are covered under the Registrar’s direction on advertising? For instance, can a search aggregator that compares moneylenders advertise through sponsored links or online advertisements which are not permitted for licensees themselves? Allowing such advertising would seem to circumvent the objectives of regulating moneylender advertisements.

On the recommendations of the Advisory Committee on Moneylending which formed the basis for these amendments, the Ministry had indicated that it will review the recommendations to create guidelines for acceptable debt collection practices at a later stage. Does the Ministry have a timeline for the review of these recommendations?

Lastly, to complement its efforts in regulating the supply-side of borrowing, it is also important for the Government to address the demand for credit by providing support for vulnerable borrowers. There are two dimensions to this problem – preventing individuals from getting into problem debt in the first place, and helping those who are in debt to regain control of their finances. Credit Counselling Singapore is a debt charity that has done commendable work through counselling, facilitating debt restructuring, and education on credit management. I urge the Government to increase support for and promote the work of such organisations to provide individuals with alternatives to illegal moneylending.

Sir, notwithstanding the above clarifications, I stand in support of this Bill.

6.05 pm

Mr Gan Thiam Poh (Ang Mo Kio): Deputy Speaker, Sir, the annual increases in the total outstanding loans taken with licensed moneylenders have been substantial. In 2016, outstanding loans totalled $367 million, an increase of 30% from $282 million in 2015, which was also up from $239 million in 2014. Correspondingly, the number of borrowers went up to 40,000 in 2016, from 35,000 in 2015 and 31,000 in 2014. I would like to check with the Ministry if the 2017 figures are available and, if so, whether there have been any changes in the trends. In addition, does the Ministry have statistics on what purposes such loans were for, such as setting up new businesses, family emergencies or to feed gambling habits?

Sir, I support the introduction of an aggregate cap which will prevent Singaporeans and residents from borrowing beyond their ability to repay, from multiple moneylenders. Hopefully, with this cap and public education, people will learn to manage their finances better and their need to borrow can be curbed. We need more measures to boost finance management education. Such public education programmes should start young and, for older persons, they should be customised, even in dialects, in order to be more effective and reach a wider range of Singaporeans.

Going forward, moneylenders will have to obtain online credit reports from the Moneylenders Credit Bureau (MLCB) before issuing a loan. I would like to check whether the reports which lenders need to rely on are the information based on other lenders' updates on loan applications, loan approvals or disbursements of loans. The timing of the input of data affects the total borrowing that lenders will rely on for their approval of loans. Any lead time will create opportunities for system arbitrage and leakages.

Next, I am concerned − as was also expressed by other Members in the House − that with the tightening of regulations, desperate borrowers will be compelled to resort to illegal moneylenders. How effectively we can curtail illegal moneylenders remains challenging, especially with harassment cases, including physical and verbal threats. Will the Ministry review whether current penalties prove to be sufficient deterrents and whether punishments, especially physical ones, such as caning, need to be increased?

Finally, under the aggregate cap, those with an annual income of less than $20,000 may borrow up to $3,000, while others may borrow up to six times their monthly income. My concern is that a borrower may try to circumvent the regulations by falsifying income documents or resort to reporting a higher income to meet the loan criteria. What measures does the Ministry have to prevent such cases?

With that, I would like to conclude with my support for the Bill.

6.08 pm

Mr Desmond Choo (Tampines): Mr Deputy Speaker, increasing levels of debt in Singapore have been an area of concern over the past few years. While the level of household debt remains high, the level of unsecured debt with loans taken from banks while it had caused some concern two years ago, the Credit Limit Management Measures by MAS have reversed this trend. The number of borrowers with outstanding unsecured debt exceeding 18 times their monthly income has declined by 47% to 27,000 borrowers, compared to 2015 where there were 51,000 people in that situation. The amendments proposed under this Bill will enhance these measures as moneylending is further tightened. Easy accessibility to finances can feed unnecessary expenditures and habits, such as gambling. The proposed measures will prevent such borrowing from spiralling out of control.

It is good that the number of high debtors with banks is decreasing. Yet, we must be cautious that the borrowing has not been channelled elsewhere. Debtors facing caps imposed on loans from banks − and soon from licensed moneylenders − might turn to unlicensed lenders, such as loan sharks. This means that the authorities must keep an even closer watch on unlicensed moneylenders who resort to creative tactics, such as sending WhatsApp messages using overseas numbers to lure borrowers. I would like to ask how will the Ministry work with MHA and other agencies to establish other ways to enforce against and further limit the access to unlicensed moneylenders.

Tightly linked to the accessibility of easy loans is their perceived attractiveness. I would like to ask if any curbs on advertisements by licensed moneylenders will be imposed. Even though these moneylenders are restricted in terms of the channels they can use to advertise, they often have glitzy websites that do not provide upfront information on the interest rates for loans or the total amount of interest that needs to be paid for the full term of the loan. Could the Ministry consider imposing a condition requiring all registered moneylenders to provide a full disclosure on the total amount of loan plus interest to be paid, for example, on their websites and advertisements?

Deputy Speaker, Sir, while most moneylenders follow the rules, there are some that have resorted to unscrupulous means to take advantage of borrowers. I would like to ask the Minister how many complaints against licensed moneylenders the Registry of Moneylenders have received on licensed moneylenders over the past two years. What are the top two types of complaints, and will the Registry consider publishing a list of blacklisted companies and a brief description of the complaint, so that borrowers are kept informed on the issues that they need to be aware of?

Currently there is a list of suspended companies at the end of the list of registered moneylenders, but it is easy to miss the names as one would have to scroll to the end of 159 companies to see them. Could the Registry consider making the list of suspended moneylenders more accessible, informative and prominent?

In terms of educating the public, will the Ministry conduct roadshows and other outreach programmes to educate the public on the law on moneylending and how to differentiate between a legal and illegal moneylender, and on the ills of borrowing in general? Every day in the heartlands, one would encounter many banks promoting various credit facilities and walk past the premises of many moneylending companies that have mushroomed in our town centres and malls. However, it is difficult to find educational posters or information sources on the ills of irresponsible money borrowing. Could the Ministry consider finding ways to balance this exposure to moneylending sources with educational information on the downsides of being burdened with debt?

Finally, with reference to my earlier point on the abundance of moneylenders setting up shop in the heartlands, could the Ministry work together with MND and other agencies to curb the number of such facilities in our heartlands? While it is true that a borrower will overcome any physical distance to seek loans and that such access can be attained online, limiting the immediacy of access and physical presence of these companies can reduce the temptation and convenience of borrowing in general.

Notwithstanding the above, this Bill will further help prevent reckless borrowing and reduce default rates. Mr Deputy Speaker, I support the Bill.

Mr Deputy Speaker: Senior Minister of State.

6.13 pm

Ms Indranee Rajah: Mr Deputy Speaker, I thank the Members for their speeches and for their support of the Bill. I will now respond to the queries raised by the Members, which fall under several broad themes:

(a) Borrower Protection and Public Education;

(b) Unlicensed Moneylending;

(c) Advertising by Moneylenders;

(d) Usage and Protection of Borrowers’ Confidential Data;

(e) Operationalising and Enforcing the Provisions of the Bill; and

(f) The Recommendations of the Advisory Committee on Moneylending.

I will address each of these in turn.

Some Members have raised concerns about whether the aggregate loan cap will drive borrowers to borrow from unlicensed moneylenders. Assoc Prof Daniel Goh asked about the moneylending trends which have led to the introduction of this aggregate loan cap. As explained in my speech, the cap was a recommendation of the Advisory Committee on Moneylending in 2015, and has been calibrated to achieve a balance between protecting borrowers and preserving reasonable access to credit. Since the recommendation was made, we have observed an upward trend in the amount of outstanding debt owed by moneylending borrowers. Among Singaporean borrowers who took out loans between March 2016 and March 2017, nearly 2% will have an outstanding balance exceeding the incoming cap. This is not a big number, around 610 borrowers, but the aggregate cap will help us to nip the over-borrowing in the bud before it gets worse.

Mr Gan Thiam Poh had also asked for 2017 statistics on the number of borrowers and the amount of outstanding loans, and why people borrow. As at the third quarter of 2017, around 41,000 individuals borrowed from moneylenders, and around 80% of these were Singaporean citizens and permanent residents subject to regulatory loan caps. Their total outstanding loan amount was $339 million. Based on a 2013 study commissioned by the Ministry of Law, borrowers who were interviewed said that the top three reasons for borrowing were to pay household bills; settle an outstanding loan from another moneylender; and to pay debts owed to friends or relatives. That said, such self-reported information cannot be independently verified and thus, may not accurately represent why borrowers take out loans from moneylenders.

What can we do to help over-indebted borrowers? Er Dr Lee Bee Wah had asked whether borrowers who have reached the cap will be required to attend credit counselling. People borrow for different reasons and we have no plans to make credit counselling mandatory. However, to complement the aggregate cap, the MLCB will send letters to over-indebted borrowers who are likely to exceed the cap when it comes into effect, to advise them to reduce their debt early. The letter will also contain details of Voluntary Welfare Organisations (VWOs) who are able to assist borrowers with financial counselling and debt management, including restructuring or consolidating their moneylending debt. Borrowers who need help can approach these VWOs.

Additionally, as I mentioned in my speech, MinLaw will continue to work with VWOs and the moneylending industry to help these borrowers to improve their situation.

Er Dr Lee, Mr Gan and Mr Desmond Choo have suggested educational campaigns on financial management and debt issues. There are ongoing public education efforts. MoneySENSE, a national financial education programme spearheaded by the Financial Education Steering Committee chaired by the Monetary Authority of Singapore, has conducted campaigns on the prudent use of unsecured credit and to encourage prudent borrowing habits by consumers. The campaigns educate individuals on how to avoid the pitfall of excessive debt, how to effectively manage debt, and the importance of sound financial planning. In the current campaign, running from November 2017 to January 2018, MoneySENSE’s key message is on the prudent use of unsecured credit.

In addition to these efforts to enhance borrower protection and inculcate responsible borrowing, unlicensed moneylending has been and will continue to be tackled head-on. We already have in place stringent laws to penalise unlicensed moneylending. In the 2010 amendments to the Moneylenders Act, penalties for unlicensed moneylending were increased, and a person convicted for the first time for an offence of unlicensed moneylending will be liable to caning of six strokes.

In response to Assoc Prof Goh’s query on the number of unlicensed moneylending cases reported and the number of offenders arrested, there were 550 reports of unlicensed moneylending to the Police in 2016, while 1,100 persons were arrested in that same year. This is a continued decline from the 1,255 arrests made in 2015. Hence, there is no evidence that the 2015 tightening pushed more borrowers to unlicensed moneylending. We will, however, continue to monitor this closely.

Er Dr Lee and Mr Gan have asked whether the Government will be enhancing penalties for unlicensed moneylending activities. The Government takes the view that the current penalties are sufficient. Besides the severity of penalties, strong enforcement is important. The Police adopts a multi-pronged approach: tough enforcement action, leveraging technology through the use of Police cameras, community partnership and public education. I am glad to inform the House that unlicensed moneylending related cases registered a 10-year low in 2016. We will continue to monitor the effectiveness of current measures to ensure that the situation remains under control.

I now turn to moneylending advertisements and the transparency of borrowing costs. Mr Louis Ng had asked about MinLaw's plans to regulate advertisements by licensed moneylenders. Mr Yam has asked if moneylenders will advise borrowers on the costs of borrowing, and how the Registry of Moneylenders will ensure that they do so, while Mr Choo has asked whether MinLaw will consider imposing a condition requiring all moneylenders to provide a full disclosure on the total amount payable for their loans on their websites and advertisements.

The advertisement of moneylending services is tightly restricted under existing laws and regulations.

Under the Registrar’s Directions on Advertising issued on 31 July 2013, licensed moneylenders are only allowed to advertise on the facades of their approved places of business, their own internet websites, and business or consumer directories in print or online media.

Licensed moneylenders are strictly prohibited from advertising on online social platforms, by mobile "short message service" (SMS), or other messaging applications, such as WhatsApp or WeChat. Platforms which do not fall within the Registrar’s Directions on Advertising are also prohibited.

Section 16 of the Moneylenders Act provides that such advertisements must not contain false or misleading material. Subsection 2 of that section and the Registrar's Directions also set out the types of information which must be stated clearly in the advertisement, including the licensee's business name and licence number, and the contractual interest rate being offered strictly as a percentage per annum.

Section 19 of the Moneylenders Act already requires moneylenders to clearly explain the loan terms to borrowers, and Rule 8 of the Moneylenders Rules specifies the details that moneylenders must convey to borrowers. These include the nominal interest rate, the method of computing interest, and the permitted fees payable, among other things.

Er Dr Lee has also asked about advertisements for hire purchases. These are regulated by the Hire Purchase Act, not the Moneylenders Act. To enable consumers to make informed decisions about hire purchase schemes, the Hire Purchase Act specifies the minimum information that owners must provide to prospective hirers in writing before they enter into a hire purchase agreement, such as charges for early settlement; effective interest rates; interest rates for overdue instalments; and administrative charges. An agreement that does not provide such information will not be enforceable.

The Government strongly encourages consumers to review the terms carefully and assess their ability to meet the financial commitments before signing any such agreement. More broadly, MAS is working with MoneySENSE to raise consumer awareness on the potential costs and pitfalls of instalment plans.

Mr Choo, Mr Yee and Mr Ng have asked whether we are working with MHA and other agencies on the problem of illegal advertising using spam text messages. Anyone who receives an SMS or WhatsApp advertisement should not respond, and should instead make a report to the Police. The Police will also conduct an investigation to establish the identity of the person sending the spam message, and take action which may include the termination of the SIM cards with the telecommunications companies. If the moneylender has a licence, the police will refer the case to the Registry who will investigate and take appropriate action.

The Police is also working with the Moneylenders Association of Singapore, IMDA, and the Personal Data Protection Commission (PDPC) to educate the general public on how to deal with such spam sent by unlicensed moneylenders offering loans.

I now turn to another important issue which some Members have highlighted - the usage and protection of borrowers' data. Mr Yee has cited instances where his constituents received unsolicited SMSes from unlicensed moneylenders offering loans, after they had approached licensed moneylenders. MinLaw takes a strict view of borrower data protection, and the Bill reflects this. For example, section 30R of the amended Act imposes duties on every moneylender to maintain the security of any information in any credit report received from the designated credit bureau. Failure to comply is punishable by a fine of $20,000 and or imprisonment of up to six months.

Any licensed moneylender found to have colluded with an unlicensed moneylender by passing on customer information will have his licence revoked and will be prosecuted under the Moneylenders Act. Such behaviour is punishable under the Act by a fine of between $30,000 to $300,000 for individuals and between $50,000 and $500,000 for bodies corporate, as well as up to six strokes of the cane for a first-time offence and up to 12 strokes of the cane for subsequent offences. The harsh penalties reflect our serious stance towards such abuses of borrower data.

All of these provisions seek to deter illegitimate usage and disclosure of borrower information.

At this point, I would like to clarify how the MLCB operates. The MLCB is a centralised data bureau. It is not a moneylender. The private company that operates the MLCB will be designated under the amended Act and subject to the full suite of legal obligations we are introducing in the new Part IIIA of the Act. These include strict requirements on maintaining borrower privacy and data confidentiality. MinLaw regulates the MLCB. Moneylenders may only submit borrower information to the MLCB through the MLCB’s secure IT portal.

As to Dr Intan's query on the sharing of borrower information, section 30Q of the amended Act prohibits moneylenders from sharing borrower information with anyone else besides the MLCB, the Registrar, and its own employees in the course of their work. This means that an individual's banks and employers, or any moneylender that he has not approached for a loan, will not be able to access his credit report unless he chooses to provide it. Likewise, under section 30W of the amended Act, the MLCB is not permitted to disclose any borrower information, except to a moneylender processing a loan application from the concerned individual, to the individual himself, to the Registrar, or to a public agency as directed by the Registrar.

Mr Ng asked whether licensees should be subject to greater oversight in relation to data protection, and Dr Intan asked how much individual information will be shared. Sir, moneylenders' access to data is limited to the circumstances spelt out in the Act, that is, to determine an individual's creditworthiness, and the data provided to a moneylender is limited to the individual's details and the borrowings of that individual. The usage and disclosure of such information by moneylenders are also subject to the regulations I mentioned earlier. Individual licensed moneylenders, just like clinics or financial institutions that also possess sensitive personal information, will need to comply with the PDPC’s guidelines on the management of data breaches.

In comparison, the MLCB is the custodian of all borrower data across the industry. There is therefore an imperative to impose a higher duty of care for the MLCB to maintain the confidentiality and security of borrower data, as we have done under section 30ZA of the amended Act.

As for Mr Ng's question about public agencies’ use of data, only the specific officers and departments that require the data will have access to it. The Public Service is governed by Instruction Manuals, which oblige public agencies to protect personal data, and access information only on a need-to-know basis.

Some Members have also raised a number of questions relating to how various provisions of the Bill will be operationalised and enforced.

Mr Gan has asked whether the reports relied upon by moneylenders are based on other moneylenders updating the system, and whether any lead time might lead to system arbitrages and leakages. The MLCB is a real-time credit bureau, and any loans taken by a borrower will be automatically updated against his record. If a borrower approaches a moneylender and is offered a loan, and does not immediately decide if he wishes to take it, the system will reserve that amount against his name. This way, the borrower cannot borrow over the permitted cap, even if he approaches a second moneylender before confirming his loan with the first moneylender.

Assoc Prof Fatimah Lateef and Dr Intan have asked how a borrower’s limit will be checked. We have designed a rigorous process to enforce compliance with the aggregate cap. Before granting a loan to the borrower, section 30N of the amended Moneylenders Act requires moneylenders to obtain a real-time credit report from the MLCB. The credit report will contain aggregated information about all the loans the borrower has taken from licensed moneylenders. After obtaining the report, the moneylender must ensure that a further loan will not result in the borrower exceeding the aggregate cap before granting that loan. Failure to abide by this verification process is punishable by a fine of $20,000 and or imprisonment of up to six months.

Given the penalties, to answer Mr Yam’s query, the nominal fee of 50 cents per credit report is unlikely to deter moneylenders from conducting due diligence before lending. In fact, the majority of moneylenders already purchase these credit reports as a matter of course. There are also in-built checks within the MLCB’s IT system to prevent a moneylender from unknowingly lending beyond the aggregate cap, and the Registry will conduct periodic audits to monitor compliance.

With the MLCB in operation, such borrowers who fail to repay their loans will leave a record. In the event of default, the usual form of recourse is for the moneylenders to pursue a civil claim against the borrowers for an unpaid debt. Under the law, there is a distinction between the non-payment of debt, which is a civil claim, and cheating, which is a criminal offence. Not all cases of defaulting debts will result in criminal investigations or prosecutions.

Moneylenders are encouraged to review and strengthen their due diligence processes before issuing loans. Rule 9(2) of the Moneylenders Rules state that a licensee "shall require the borrower to provide reliable and independent documentary evidence in support of all information provided in the loan application form, and verify the information against such evidence". This would include a borrower’s actual address. Besides asking for a borrower's identity card to verify his actual address, other documents like IRAS and CPF statements, and utility bills, can be requested from a borrower.

Assoc Prof Fatimah and Mr Yam have also asked about oversight over whether moneylenders fulfil their obligation to update the MLCB after dispensing a loan, under section 30N of the amended Act. In addition to the Registrar’s regular audits, section 24A of the amended Act requires all licensees to conduct independent audits of the licensees' accounts and to submit those audited financial statements to the Registrar every year. These will help ensure that moneylenders are reporting all their transactions accurately. If these audits reveal that there are loans which have not been reported accurately, appropriate action will be taken against the licensees.

Next, in relation to the Bill’s prescribed conditions on the suitability of individuals to participate in moneylending activity, Mr Ng has asked how the Singapore authorities are able to assess whether an individual had previously carried out moneylending activity in a foreign country but had his licence revoked. The Registry has a number of tools which allow them to conduct checks on relevant personnel and their involvement in foreign moneylending businesses, and where there is evidence to suggest that a further investigation should be carried out, we will work with the relevant authorities to do so.

Mr Ng has also asked whether the Registrar will be providing reasons when rejecting an application and what channels and grounds of appeal are available to a rejected applicant. Even though there is no statutory right of appeal available for a rejected applicant, the Registrar will provide the rejected applicant with reasons for the rejection. It is worth highlighting that the grounds for denial of approval are largely based on indisputable matters of fact, as spelt out in subsections (4)-(5) of sections 11A and 11B of the amended Act. That said, subsections (7) of the same two sections do provide that the licensee seeking to employ or hire an applicant has a right to be heard by the Registrar, and that the Registrar may not refuse to grant such approval unless the licensee has been heard first.

Mr Goh also asked about peer-to-peer lending platforms, and whether the present law is effective to tackle the potential of such platforms being de facto moneylenders. Sir, section 3 of the Moneylenders Act states that "any person, other than an excluded moneylender, who lends a sum of money in consideration of a larger sum being repaid shall be presumed, until the contrary is proved, to be a moneylender". This presumption is sufficiently expansive to cover peer-to-peer platforms and their participants. The Government has been monitoring such platforms, and has so far not found them to have run afoul of our laws. We will continue to keep a close watch to ensure a proper balance between providing the space for these fintech innovations, and protecting vulnerable Singaporeans.

Mr Choo has also asked about the number of complaints against licensed moneylenders received by the Registry. In 2016, 124 reports were received by the Registry, and this number dropped to 104 in 2017. There are two main types of reports received. The first type are requests for assistance to re-negotiate their contracts with the moneylenders. Such requests would be referred to an appropriate VWO for assistance. The second type are complaints about debt collection and harassment. The Registry will speak to the moneylender concerned, and also advise the complainant to lodge a Police report if the debt collection activities in question may be criminal in nature. The Registry will continue to take licensing action when infractions are committed. MinLaw issues press releases when moneylenders are convicted of offences under the Moneylenders Act. Nonetheless, we will take Mr Choo’s suggestion on-board and consider how to make the list of suspended moneylenders more visible on the Registry’s website.

Mr Yam has asked about the measures being taken to get the remaining licensees who have not corporatised to comply. The Bill introduces a new section 6A, which provides that only a company with the prescribed paid-up capital may hold a licence after the appointed day. A licence held by any other body or individual person will be deemed to have been revoked, and he will be considered to have been engaging in moneylending without a licence, which is punishable under the current section 14.

Assoc Prof Goh has also asked a number of questions on the recommendations of the Advisory Committee on Moneylending.

For the recommendation on the lifting of the moratorium on the granting of new licences, as mentioned in my speech earlier, MinLaw is exploring lifting the moratorium in a limited and controlled fashion to allow a few new players with established track records in related financial areas to pilot new business models. More details will be released when ready.

For the recommendation on the creation of guidelines for debt-collecting practices, a point which Mr Yam has also raised, MinLaw is working with the Moneylenders Association of Singapore to develop a handbook for licensed moneylenders to encourage professional and fair business practices, which include debt recovery approaches. MinLaw currently does not track statistics on how many moneylenders employ their own debt collectors, and how many of them outsource this. That said, there are existing laws that adequately address unlawful debt collection practices, such as the Protection from Harassment Act and the Penal Code.

I turn now to the recommendation relating to the monitoring of the location of moneylenders, and note that Mr Choo also has asked if MinLaw will work with MND to curb the number of facilities in the heartlands. The Registry conducted a geospatial study with the Singapore Land Authority in 2017, and found that borrowers are increasingly borrowing from moneylenders situated outside their neighbourhoods. On the whole, there is no evidence that the location of moneylenders induces borrowing. Nonetheless, we will continue to monitor the situation.

As for the recommendation on standardising loan products, MinLaw took in the recommendation and amended the Moneylenders Rules in 2015 to mandate that all loan contracts provide for payment of equal instalments at equal intervals of time, to facilitate comparison of loan packages. But beyond this, MinLaw is mindful that over-standardisation could prevent moneylenders from properly catering to the diverse risk profiles and needs of individuals who borrow from them. We believe the best approach is to provide specific directions, such as Registrar's Directions No. 1 of 2017 which, amongst other things, prohibit short-term loans which are repeatedly re-financed or renewed.

Mr Deputy Speaker, Sir, I would like to conclude by thanking the Members once again for their support of the Bill and for their invaluable feedback. The proposed amendments to the Act are important to support safer access to credit from licensed sources by those who most need it. MinLaw will continue to work with other agencies and stakeholders to protect individual borrowers while maintaining their access to credit. Sir, I beg to move.

Mr Deputy Speaker: Mr Yee Chia Hsing, did you want to make a clarification?

6.40 pm

Mr Yee Chia Hsing: Thank you, Mr Deputy Speaker. On this issue of sharing of information from a licenced to a unlicensed moneylender, because they can just pass a sheet of paper at the coffee shop, it is very difficult to prove. So, may I suggest to the regulator, they consider having what we call "mystery shopper"? That means we get somebody to approach a licensed moneylender and if soon after that, that person receives an SMS, and if it is proven through multiple mystery shoppers who approached this person, then we have circumstantial grounds to charge that the moneylender is indeed passing on information.

6.40 pm

Ms Indranee Rajah: Mr Deputy Speaker, I thank the Member for his suggestion, we will look into it.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Ms Indranee Rajah].

Bill considered in Committee; reported without amendment; read a Third time and passed.