MONEYLENDERS (AMENDMENT) BILL

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MONEYLENDERS (AMENDMENT) BILL: Order for Second Reading read.

3.25 pm

The Senior Minister of State for Law (Assoc. Prof. Ho Peng Kee): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Objective

Members may recall that last year, we amended the Moneylenders Act to introduce higher penalties to curb the rise in illegal moneylending activities and related harassment cases. I informed Members then that those amendments were part of a larger exercise to update the Moneylenders Act.

The Moneylenders Act was enacted way back in 1959. Its main objective then was to regulate moneylending so as to put a stop to malpractices that were carried out by unscrupulous lenders. That objective of preventing such practices remains.

However, in recent years, the moneylending business in Singapore has seen vast changes with the introduction of new and more sophisticated business financing and consumer credit services. Therefore,

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we need to update the regulatory framework in the Act to allow it to remain effective in dealing with these and future developments. This is especially so with new business models that are different from traditional moneylending as we know it, but which do not come under regulatory frameworks, like those governing banks, finance companies and the securities industry. Amendments are necessary to allow us to impose rules on both licensed and exempted moneylenders to have greater consistency with financial institutions in the regime governing personal loans.

Furthermore, the global fight against money laundering and terrorism financing also requires us to have suitable powers in our laws to allow for more specific measures and guidelines to be put in place for moneylending activities. The current framework, for example, does not allow for rules and guidelines to adopt the Recommendations of the Financial Action Task Force. The Financial Action Task Force - or FATF as it is popularly known - is an inter-governmental body whose purpose is to develop and promote policies, both at national and international levels, to combat money laundering and terrorism financing.

Having provided this backdrop of the developments, let me touch on the salient features of the Bill.

Proposed amendments affecting the Registrar

Clause 4 (new sections 10A and 10B)

Clause 4 includes two new provisions to enable the Registrar to more effectively administer the Act. He will have the power to issue notices to moneylenders to provide information or documents, and the power to enter premises and inspect documents. Failure to comply with the Registrar’s notice or obstructing the Registrar’s entry will be an offence punishable by fine or imprisonment.

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Clause 3 (amendment to section 10)

Under clause 3, the Registrar will be given the discretion to suspend a licence in appropriate cases, instead of only having the power to revoke it.

Proposed amendments affecting the Minister

Clause 5 (amendment to section 36)

Under clause 5, the Minister will have the discretion to revoke, in whole or in part, an exemption granted to an entity when there is a breach of any condition or rule or if it is in the public interest to do so.

The Bill makes it clear, however, that any revocation will not affect any moneylending transaction entered into before the date of the revocation.

Clause 6 (repeal and reenactment of section 37)

Sir, the current limited rule-making powers of the Minister will be repealed and replaced by a modern set of powers that will enable him to, amongst others, prescribe rules for all moneylenders or specific classes or descriptions of moneylenders.

The rules can cover measures to prevent money laundering and the financing of terrorism, as well as various aspects of moneylending businesses, including the maximum amount that a moneylender can lend to a borrower. These rules can also be extended, where appropriate, to regulate entities that have been granted discretionary exemptions from the Act.

In proposing these amendments,

we continue to be mindful of the need to strike a balance between preventing people from spending beyond their means on the one hand; and providing access to

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credit for those who are in genuine financial need and who do not have access to social assistance schemes or legitimate channels of lending on the other.

Conclusion

In conclusion, Sir, these amendments will enable the Government to more effectively regulate moneylenders and to establish a more consistent regulatory regime for personal loans. They will also help us in our fight against money laundering and terrorism financing.

Sir, I beg to move.

Question proposed.

3.30 pm

Ms Indranee Rajah: Mr Speaker, Sir, I support the proposed amendments to the Moneylenders Act.

The Moneylenders Act was most recently amended in November 2005, and those amendments focused on illegal moneylending, enhancing the penalties for illegal moneylending and making it an offence to harass debtors. Those amendments, together with the setting up of the Anti-Unlicensed Moneylenders Task Force, had netted returns. It has been reported that five heads of moneylending syndicates have since been arrested.

The current amendments, however, focus on updating the regime for the legal moneylending business, and these amendments are both welcome and timely. The current Moneylenders Act is an old piece of legislation. It was modelled on the Straits Settlement Moneylenders’ Ordinance of 1935, which was, in turn, based on the English Moneylenders Act of 1900. The business environment and the circumstances

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against which credit is advanced have changed greatly since then.

In the High Court decision of City Hardware Pte Ltd v Kenrich Electronics Pte Ltd , Justice V K Rajah had, in his judgement, noted that the time had come for a holistic review of the Moneylenders Act against a wider backdrop of modern consumer credit policy relevant to Singapore.

Under the proposed amendments, the old section 37 of the Moneylenders Act will be repealed. The new section 37 allows the Minister to make a wide range of rules in respect of the moneylending business. This, I think, is an important first step towards being able to have a holistic revamp to the moneylenders’ regime.

The proposed new section 37 allows the Minister, for example, to make rules in a variety of situations, such as prescribing the maximum amount that may be lent to a borrower or a class or a group of borrowers. It also allows the Minister to prescribe the class or prescription of borrowers to which the moneylenders may make a loan and to prescribe the maximum rate of interest that may be charged for any loan or class of loans.

The amendments signal a new approach to legal moneylending. The ability of the Minister to make rules in the categories suggested under the proposed new section 37 indicates that there will be a differentiation in the classes of people to whom loans can be made. This, in turn, means more flexibility in the credit business. The old regime was more of a situation where one size fits all, whereas the ability to make the rules proposed in the new section 37 would allow for recognition of the different classes of borrowers and greater flexibility and responsiveness to the moneylending business. This is important in today’s credit environment where there is a wide

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range of consumers, ranging from the relatively uninformed to those who are savvy about consumer credit.

The proposed new sections 10A and 10B are also to be welcomed. The proposed new section 10A empowers the Registrar or an officer authorised by him to require the moneylender to provide information or documents.

The new section 10B empowers the Registrar or an officer to enter premises used by a moneylender to carry on business in order to inspect the premises and documents found on the premises.

This power to request information is important because it lends teeth to investigation and enforcement. It will make it harder for offenders to disguise or hide any breaches of the Moneylenders Act. It would also help to clamp down on money laundering or possible terrorist financing activities.

The proposed amendments are a move in the right direction to provide a more holistic approach to the business of legal moneylending. But it is hoped that this will not be the end of the process. Constant review and updating of the Act to keep apace with the fast-changing consumer credit industry will provide a good foundation for the legal moneylending business.

Sir, with this, I support the amendments.

Assoc. Prof. Ho Peng Kee: Sir, I thank the GPC Chairman, Ms Indranee Rajah, for her support of the Bill.

Essentially, she makes two key points. The first is with regard to new sections 10A and 10B. She is absolutely right. They will sharpen the teeth of the Registrar of Moneylenders requiring moneylenders to provide information and documents and also enable him and his

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officers to enter premises and inspect documents. But as important, together with the enhanced powers of the Minister, to make rules under section 37, these new provisions will not only provide greater efficiency and inject more flexibility to the administration of the Act, they also enable Singapore to adopt the recommendations of the Financial Action Task Force, something which I had mentioned earlier.

As I said in my speech, the moneylending landscape has evolved since 1959 - a point, I think, also made by Ms Rajah. So we do need to finetune our legislative framework to cater to this. Indeed, there are also new challenges like money laundering and terrorism financing. So, as part of a responsible member of the FATF, we also have to ensure that our legislative framework satisfies the requirements of the grouping.

As for the need to amend the Moneylenders Act further in lieu of what Justice V K Rajah had said in the case mentioned by Ms Rajah, she is right that these amendments are useful first steps. For example, the enhanced scope and the rule-making powers granted to the Minister will enable him to take into account the new landscape, something that both myself in my speech and Ms Rajah's had mentioned. Since its enactment in 1959, previous earlier major amendments had dealt mainly with enhancing powers to deal with illegal moneylending, harassment and other like situations. So these amendments under consideration are really the first set of amendments which addresses the wider issue of the framework governing legal moneylending since the Act was first enacted in 1959. So let us see how these amendments work out before we assess the need for further amendments.

On the point not quite arising from the Bill but related in a way, because as I said

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when I moved the amendments to the Moneylenders Act in November last year, when we tackle illegal moneylending, we take a holistic approach. I am happy to report that arising from the tougher punishment regime that was put into the Act last year and also actions taken both by MHA, the Police and other related agencies, the ground situation has indeed improved. In particular, the Police's resources have been beefed up, concentrated in the Unlawful Moneylending Task Force residing in CID. And as has been said, three raids have been carried out and actually, two syndicate heads have been arrested. We will push on with these measures.

Sir, I think I have answered the key points raised by Ms Rajah.

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. - [Assoc. Prof. Ho Peng Kee].

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

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4.05 pm.

_Sitting accordingly suspended
at 3.40 pm until 4.05 pm _ .

_ Sitting resumed at _ 4.05 pm

** [Mr Speaker in the Chair] **