04 Apr Truth About Money Lending in Singapore – What You Need to Know About the Legal Framework
Money lending is an essential service for many individuals and businesses in Singapore. However, the practice of money lending is highly regulated to protect borrowers from unscrupulous lenders. In this article, we will discuss the legal framework surrounding money lending in Singapore, including licensing requirements, interest rate caps, and debt collection practices.
Have you ever wondered how moneylenders operate in Singapore? Read on to find out about the legal framework in place to protect borrowers.
Under the Moneylenders Act, any person or company engaging in the business of money lending must be licensed by the Ministry of Law. The licensing process involves meeting certain criteria such as having a minimum paid-up capital of S$100,000, a good track record, and a fit and proper person test for directors and shareholders.
A licensed money lender in Singapore is required to adhere to a set of regulations, including not charging excessive interest rates, not using threatening or abusive language, and not harassing borrowers. Failure to comply with these regulations can result in the revocation of a money lender’s license.
Interest Rate Caps
The Moneylenders Act also imposes interest rate caps on licensed money lenders. The maximum interest rate that can be charged is 4% per month.
These interest rate caps are intended to prevent borrowers from falling into a debt trap by borrowing at exorbitant interest rates. Borrowers should be aware of the interest rates charged by money lenders and should only borrow what they can afford to repay.
Debt Collection Practices
Debt collection practices are also regulated under the Moneylenders Act. A legal money lender is required to follow a set of guidelines when collecting debts from borrowers. These guidelines include not using threatening or abusive language, not contacting borrowers outside of reasonable hours, and not disclosing the borrower’s debt to third parties.
Borrowers who feel that they are being harassed by a money lender can make a complaint to the Registry of Moneylenders. The Registry will investigate the complaint and take appropriate action if necessary.
The legal framework surrounding money lending in Singapore is designed to protect borrowers from unscrupulous lenders. Licensed money lenders are required to adhere to a set of regulations, including licensing requirements, interest rate caps, and debt collection practices. Borrowers should be aware of their rights and obligations when borrowing from money lenders and should only borrow what they can afford to repay.
If you are considering borrowing money from a money lender, be sure to check that they are licensed by the Ministry of Law and that they are adhering to the regulations set out in the Moneylenders Act. By doing so, you can avoid falling into a debt trap and ensure that you are protected by the legal framework in place.