MONEYLENDERS (AMENDMENT) BILL

Order for Second Reading read.

3.04 p.m.

The Minister for Social Affairs (Encik Othman Bin Wok): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Moneylenders (Amendment) Bill was introduced in Parliament on 24th March, 1975. The purpose of the Bill is to facilitate the control of moneylending in the Republic and to increase the penalties for offences committed under the Moneylenders Act (Chapter 220 of the Revised Edition).

There are at present 453 licensed moneylenders in the Republic, whose main clients are the poorer members of our community. It is, therefore, necessary to safeguard the interest of the poor and to ensure that the law protects them against exploitation by unscrupulous persons. The Moneylenders Act is not wholly satisfactory, and the proposed amendments are essential to plug the loopholes in the Act and to curb malpractices in moneylending activities.

The penalties for illegal moneylending will be heavier under the proposed amendments. Section 8 of the Act will be amended to increase the maximum fine for such offences from $1,000 to $5,000. A second or subsequent offender is liable to imprisonment not exceeding 12 months or a maximum fine of $1,000 or both imprisonment and fine. Under the proposed amendment, the maximum fine will be raised to $5,000. In the case of a company, the penalty for a second or subsequent offence will be increased from a fine not exceeding $5,000 to a fine not exceeding $10,000. My Ministry takes a serious view of illegal money-lending and will not hesitate to act against any person who is guilty of this offence.

The Bill also seeks to amend section 9 of the Act to empower the Registrar to refuse to issue a licence if the applicant or any partner, director of other person responsible for the management of a moneylending firm is below the age of 21 years. Furthermore, section 10 will be repealed and re-enacted to give the Registrar powers to revoke a licence. However, the person whose licence has been revoked will be allowed to appeal to the Minister whose decision will be final. Some forms of malpractice in the moneylending business are difficult to prove, and this new provision will enable the Registrar to cancel the licence of any moneylender if there is adequate information from various sources to indicate that the moneylender is not fit to hold a licence.

Section 16 of the Act will be amended to make it mandatory for moneylenders to give out every loan in the form of a crossed account payee cheque. If they fail to do so, they will be liable to pay the penalty of a fine not exceeding $2,000 or imprisonment for a term not exceeding six months or both fine and imprisonment. The safeguard that this requirement provides for the borrower outweighs the inconvenience to the borrower who has no bank account. In addition, moneylenders will be required to obtain from the Registrar of Moneylenders forms to be used as promissory notes. Such forms will be serially numbered and controlled by the Registrar.

The Bill also seeks to amend section 19 of the Act. Moneylenders will be required to account for or explain any item or detail appearing in the quarterly statements of their cash and loan position which they submit to the Registrar under this section. The penalty for failure to comply with the requirements of section 19 will be increased from a fine not exceeding $50 to a fine not exceeding $1,000. In the case of a continuing offence, the penalty will be increased from a fine not exceeding $10 to a fine not exceeding $100 for each day during which the offence is continued after conviction. The present penalty is not a sufficient deterrent and many moneylenders have repeatedly contravened this section of the Act. Since 1970, the Registry of Moneylenders has recorded 94 convictions under this section. It is, therefore, desirable to increase the penalty to ensure that the requirements of the Registry are complied with.

At present, section 20 of the Act requires a moneylender to issue a receipt for every repayment he receives, only if the payer demands it This section will be amended to make a moneylender give such receipts for every repayment regardless of whether the payer demands one. The penalty for an offence committed under this section will be increased ten-fold to a fine not exceeding $2,000.

The Bill also seeks to amend section 23 of the Act to make usury an offence, and a moneylender convicted under this section will be liable to a fine not exceeding $2,000. For a second or subsequent offence, he will be liable to a fine not exceeding $5,000 or to imprisonment for a term not exceeding one year or to both fine and imprisonment. If it is a company that lends the money, the penalty for a second or subsequent offence will be a fine not exceeding $10,000. At present, interest rates above 18% per annum for unsecured loans and 12% per annum for secured loans are considered excessive, but there is no provision to prohibit moneylenders from charging interest above these rates or to penalise them if they do so. The Bill seeks to make it an offence for a moneylender to charge a higher rate of interest for a loan than is prescribed in the Rules made under the Act.

Section 25 of the Act will be amended to require a moneylender to accept any repayment above $10 in the form of a cheque, money order or postal order. Moneylenders who contravene this requirement will be liable to a fine not exceeding $500. This provision is desirable to protect the borrower and also to facilitate Police investigations. Many low wage earners and poor traders settle their loans by instalments of $10 to $50, and the amendment is necessary to ensure that such borrowers are not cheated at the time when repayments are made. Although a moneylender will be required to issue a receipt for any payment received by him, this alone is not adequate because, in any particular case, it would be difficult to prove that a receipt was not issued when a repayment was in fact given. The extra costs involved for the payment of bank commission or fee for the purchase of postal order or money order are negligible, and it is worth incurring such expenditure to further protect the borrower. Cheques, money orders and postal orders can be easily obtained, and I am confident that this requirement will soon become an accepted practice although it may initially cause some inconvenience.

The Bill also seeks to amend section 31 of the Act to increase the penalty for making a promissory note in which the principal or the rate of interest is not truly stated or is left blank. The maximum fine for such an offence will be increased four times to $2,000. For a second or subsequent offence, the present penalty is a fine not exceeding $1,000 or imprisonment not exceeding six months, or both fine and imprisonment. The maximum fine will now be increased to $5,000.

Likewise, section 33 of the Act will be amended to increase the penalty for harassment of a debtor or any member of his family. At present, the penalty is a fine not exceeding $250 or imprisonment not exceeding three months, or both such fine and imprisonment. The proposed amendment will raise the maximum fine to $2,000. If the offender is a company, the fine will be $5,000 instead of the present $1,000.

Finally, the Bill also seeks to introduce a new section 34A to the Moneylenders Act. The Registrar or a Police Officer not below the rank of Assistant Superintendent of Police may authorise a Police Officer of the rank of Sergeant and above to enter the premises of any person who is suspected of having contravened the provisions of the Act and to inspect or seize any book or document relating to moneylending transactions, without warrant from a magistrate. This provision will facilitate Police investigations. In the past, legal action could not be taken in many cases of alleged illegal moneylending or malpractices by moneylenders simply because evidence was lacking. For instance, since 1970, the Registry of Moneylenders has received 80 complaints against illegal moneylenders, and yet only five of these cases resulted in the conviction of the culprits.

Likewise, it has been difficult to convict moneylenders for other offences committed under the Act, partly because the borrowers themselves are reluctant to cooperate with the Registry of Moneylenders and the Police in their investigations. It is, therefore, desirable to widen the powers of the Registrar and to introduce amendments to the Act which will help curb these malpractices.

Sir, I beg to move.

Question proposed.

3.15 p.m.

Mr Cheong Yuen Chee (Toa Payoh): Mr Speaker, Sir, may I seek clarification from the Minister for Social Affairs on clause 5, amendment to section 16 of the Act, which requires a moneylender to make a loan to the borrower in the form of an account payee crossed cheque. I am afraid this may create difficulties for the borrower because, in encashing the cheque that is so endorsed, the borrower must have a banking account unless he banks it in the Post Office Savings Bank. Moreover, if the borrower wants to open a bank account, he must have a minimum of $500. In other words, we are encouraging a borrower to borrow more than $500. Administratively this requirement will create some difficulty for the borrower.

May I seek clarification whether any other form of payment can be allowed, such as the moneylender purchasing a money order or a postal order in the name of the borrower?

Encik Othman Bin Wok: Sir, as I have said just now, in the initial stage, there will be inconveniences. I presume everyone has a Post Office Savings Bank account. If it is so, the moneylender can buy a postal order or whatever it is in the name of the borrower to enable him to put it in his Post Office Savings Bank account. But in the case of an account payee cheque, if he has no bank account I think he could sign it and pass it on to his friend who will put it in his own bank account.

Mr Cheong Yuen Chee: No. He cannot do that unless it is a simple crossed cheque. If the cheque is an account payee cheque, only the person named on the cheque can bank it if he has his own bank account.

Mr Ng Kah Ting (Punggol): Sir, I think my colleague, the Member for Toa Payoh, is correct when he says that any cheque that is made out as an Order cheque is paid to the order of the person so named on the cheque. So unless the person has a bank account he will not be able to encash the cheque. But perhaps to get round it, the moneylender could state the borrower's name and identity card number on the cheque, without the need to cross it. This is my suggestion, Sir.

Encik Othman Bin Wok: Sir, I think it is simplest for the borrower to open a Post Office Savings Bank account and bank in the cheque.

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. - [Encik Othman Bin Wok].

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