Moneylending is, and has always been, a very lucrative business venture. More and more people are getting into it, as times are uncertain these days.

There is always a demand for moneylending because every day people are looking to buy property, further their studies, or pay medical bills despite their meager incomes.

Borrowing from banks is more difficult due to their stringent processes, which take more time. In the case of a financial emergency, speed is everything.

Money lenders are fully aware of this, which is why they sometimes try to take advantage of a borrower by instituting unreasonable and excessive fees.

Unfair loan repayment terms have made it hard for some to remain debt-free. Some may even have to take more loans to pay other loans.

Some unscrupulous money lenders even sell borrowers’ records to different lenders to offer other unfair loans to them.

The following article will address the common unfair moneylending practices in Singapore, how to spot a loan scam and how to lodge a complaint against a money lender, both licensed and unlicensed.

Unfair Practices By Money Lenders

Unfair moneylending practices are deceptive, abusive, fraudulent, or discriminatory activities before, during, or after loan origination.

Such lending practices can prevent one from moving up different stages in life. Borrowers may end up paying a hefty price for dealing with such lenders.

Three-Digit Interest Rates

A three-digit interest rate is, at best, a debt trap. These loans operate on such high-interest rates and are usually sold as a short-term quick fix for logbooks, paydays, and other emergencies.

Ironically, these loans end up becoming long-term. They drain borrowers in the hundreds, if not in the thousands.

A three-digit interest rate is not necessarily illegal. However, we view it as unfair because most of the fees owed are higher than the actual loan taken. They usually carry an average percentage rate of up to 400%.

Lenders love issuing these loans as they give them extreme leverage over the borrower.

Adding Extra Loan Services And Costs

The initial agreed repayment amount should be the final paid amount. A lender should not roll out more costs mid-repayment.

Lenders must be transparent about additional fees during loan origination. Sneaking in fees is illegal and unfair.

Charging Extra For Low Credit Scores

As absurd as it may sound, this happens. A bad credit rating would prevent one from accessing a loan facility from a bank and other lenders.

With this information, some lenders then issue loans to people with bad credit at higher rates.

The lender might also cunningly pull a bait-and-switch approach by allowing one to apply for one thing and, at the last moment, switch to a more expensive facility citing poor credit.

High-Risk Secured Lending

The preferred target for high-risk secured lending is people with poor credit.

High-risk secured lending offers lax credit requirements as a honey trap. A high-risk asset like a land title or car logbook is used as security with the hopes that the borrower may find it hard to pay.

Rushed Paperwork

Some money lenders rush their clients into signing papers they have not read.

First-timers are the target in this category. They quickly get into the trap of unfair terms or fees by not carefully reviewing the terms.

Some money lenders also present a second set of documents for signing after issuing the loan. This is usually a sign of fraud.

Loan Flipping

Loan flipping refers to refinancing a loan by taking another loan (long-term). The newer loan usually has higher interest rates and is more expensive.

Misrepresentation During Application

When signing onto a loan, an agent may lie or ask a borrower to lie to improve their chances of getting a loan. This is a form of fraud and is likely to get a borrower into trouble during repayment.

Failing To End Automatic Electronic Payments

Lenders should stop preauthorised electronic fund transfers once a borrower closes his loan account. Failing to end it results in additional unnecessary charges on the client.

Incorrectly Handling Partial Payments

When handling partial payment, lenders should be diligent enough to either credit an amount, return it to the consumer or hold it in an unapplied account.

Some lenders put these funds in their accounts instead of crediting them to the borrower.

What Is Unlicensed Moneylending?

Unlicensed Moneylending (UML) refers to the activity of lending money to another person or entity by an unlicensed individual or organisation.

An “Ah Long” or loan shark is the term for someone operating without a moneylending license in Singapore.

Unlicensed loan sharks in Singapore are well-known for their extreme harassment methods when chasing debts. They may destroy property or even resort to physical violence.

The Singapore government strongly advises its citizens to avoid borrowing from unlicensed lenders or assisting them in recovery.

In the case of one suspect of any loansharking activities, citizens should make a detailed report to the relevant authorities.

There are neighborhood community groups that are also helping to clamp down on this illegal venture

– Citizens on Patrol. These community groups help to monitor cases such as illicit money lending in Singapore’s communities that may breed instability.

When To Lodge A Complaint Against A Licensed Money Lender

The Ministry of Law has the mandate to regulate money lenders in Singapore. The Ministry of Law sets rules on allowed and prohibited lending practices to promote safe and professional money lending.

In Singapore, you are free to complain about a money lender should they do the following:

Harass Or Threaten You

Harassment and threats are unethical. A person’s need does not mean lenders should not handle them with dignity and utmost respect. It is a criminal offense to harass and threaten a borrower in Singapore.

Charge Exorbitant Interest Rates

Regardless of the loan amount, a licensed lender in Singapore should not charge a loan interest exceeding 4% per month. This rule applies even when an interest payment is late.

Interest computation should be according to the outstanding monthly balance. Suppose you took a loan of $6,000 and have paid $2m000, the remaining $4,000 is what is to be used when computing interest.

Impose Fees That Exceed The Principal Amount

The rates made to service the loan should not exceed it. The rates could include interest rates, legal fees, or fees for late payment.

A licensed money lender could quickly get in trouble for imposing fees exceeding the principal amount.

Other instances where you can take action against a money lender include if they:

• Use offensive or abusive language
• Retain your NRIC or other identification documents
• Ask you to sign on a plain or partial Note of Contract for the loan
• Retain your principal loan amount in part or fully
• Offer you a loan minus due diligence (i.e. face-to-face verification)

How To Lodge A Complaint Against A Money Lender

Lodging a complaint against a licensed money lender is pretty straightforward.

First, you could lodge an online complaint with the Ministry of Law through the Registry of Moneylenders. You can also contact the Registry at 1800-2255-529 or email them at OneMinLaw@mlaw.gov.sg.

The Registry does not disclose the complainant’s details to the money lender without their approval.

It will exhaustively investigate the allegations following an interview of the borrower to learn more about the circumstances that led to the complaint. The money lender will face the law if found to have acted unfairly.

The Small Claims Tribunal or the Court under the Consumer Protection (Fair Trading) Act is another avenue a client can pursue upon mistreatment.

Unlicensed money lenders are also not spared. You may complain about them via the X-Ah hotline at 1800-924-5664 or contact the police at 999.

How Not To Fall For Loan Scams

Read Loan Documents Before Signing Them

When taking a loan, read the fine print. All the contracts and documents should be thoroughly reviewed and understood.

Do the math and make sure that the documents are complete. Also, study the terms before placing your signature as much time as possible.

Find A Trustworthy Lender

The Ministry of Law is Singapore’s recognised regulator of money lending licenses. You can find its list of licensed money lenders online.

The ministry also keeps a record of the blacklisted moneylenders in Singapore to protect borrowers.

Give Correct Information During Loan Application

Do not lie on your loan application form, even if told to do so  by your loan agent. Lying could get you into trouble during repayment, and you may face fraud charges.

Seek Loans From Licensed Lenders

If you have poor (or low) credit scores, seek loans from licensed customer-oriented lenders such as credit unions. Some credit unions do not have a credit score requirement or exist in the almost-zero thresholds.

Do Not Put Up Essential Property as Collateral

Avoid taking loans with lenders pressuring you to use property as collateral. Losing your family home, for instance, will leave a devastating mark on your life.

Conclusion

Moneylending in Singapore has come a long way. The government and related agencies have helped develop policies to solve loan shark problems in Singapore.

However, there is still a long way to go in fighting illegal money lenders in Singapore. Unlicensed money lenders continue to flourish as their loan facilities come fast and sometimes without the need for collateral.

Here at BST Credit, we champion borrowing from licensed lenders.

If you are looking for more information on how to lodge a moneylending complaint, kindly contact us on +65 6299 1782 or enquiry@bstcredit.com.sg.