Controls on Licensed Moneylenders

Mr Alex Yam asked the Minister for Law (a) if he would provide the latest update on the number of licensed moneylenders who have contravened the Moneylenders Act for misleading advertising and marketing materials; (b) what plans would be put in place to ensure that advertising and marketing materials of moneylenders in the print media adhere to the Act; and (c) whether his Ministry would consider amending the Act to further strengthen controls on moneylending.

Ms Tin Pei Ling asked the Minister for Law (a) whether there is a quota imposed on the number of licences issued to moneylenders; and (b) what is the framework governing the applications and practices of licensed moneylenders.

The Minister for Law (Mr K Shanmugam): Sir, with your leave, I will take Question Nos 2 and 3 together, please.

Mr Speaker: Yes.

Mr K Shanmugam: Sir, Ms Tin asks if there is a quota on the number of moneylending licences, and what is the framework governing the applications and practices of licensed moneylenders.

The Registry has not imposed a quota on moneylending licences. What the Registry has done is impose rigorous requirements on licence applicants and licensees. For example, as part of the application process, the Registry conducts robust checks on the licence applicant and all other persons involved in his business to ensure that they are fit and proper persons. The Registry also requires all moneylending business outlets to be managed by a qualified manager.

On 1 November 2011, a set of new rules was implemented to tighten the governance of licensed moneylenders. These require, amongst others, moneylenders to seek the Registry's approval for the engagement and employment of any person to assist in their business. The new rules also further safeguard the interests of borrowers by, for example, disallowing moneylenders from disclosing any information about their borrowers to third parties without obtaining the prior written consent of the borrower, and prohibiting moneylenders from making any upfront deduction of interest payments from the principal loan.

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Sir, let me now address the questions concerning advertising by moneylenders raised by Mr Yam. We have allowed advertising so as to allow borrowers to more easily compare the terms between different moneylenders and choose the best one for their needs. Under the Moneylenders Act, all such advertisements must be accurate and not be false or misleading.

We are concerned that excessive advertising could encourage excessive and unnecessary borrowing. Thus, the Registry has implemented new rules, also on 1 November 2011, to regulate more strictly the advertising and marketing activities of moneylenders. Under these rules, moneylenders are allowed to advertise only through specific channels – business directories, on their business website, and at their business premises. They are no longer allowed to advertise through other channels, in particular newspapers and through SMSes.

Since the implementation of the new rules, the Registry has been monitoring advertisements in various channels, including the newspapers and the Internet, as well as investigating complaints. As of 14 November 2011, 32 licensed moneylenders were found to have committed breaches of the new advertising rules. All the 32 moneylenders had been warned and have since complied with the Registry's instructions to rectify the breaches. If they repeat the breaches, the Registry will take stern enforcement action, which may result in the revocation of their licence, and for even more serious breaches, prosecution in court. Where advertisements were found to be by unlicensed moneylenders, they have been referred to the Police for investigation.

As mentioned in this House before, we will keep a close watch on the moneylending industry. We are reviewing other aspects of the industry and will take further steps to tighten regulation and protect borrowers, as may be necessary.

Mr Alex Yam (Chua Chu Kang): One supplementary question, Sir. I would first like to thank the Minister for the update on the change to the guidelines since 1 November 2011 and the actions taken by the Registry since then. With the outreach of the moneylenders now extending beyond the traditional older generation of borrowers towards a far larger and younger pool of borrowers, would the Registry under the Ministry of Law also consider including guidelines or compulsory education for borrowers on their commitments in the future?

Mr K Shanmugam: Sir, the Ministry of Law, in another context, in the context of bankruptcy, has started a series of processes to educate Singaporeans on better management of their own finances. We have not really thought in terms of outreach for young people on how they should handle their finances. We will certainly consider that, but it is likely to be an extensive exercise and we need to be careful about going down that road.