United States: Strides Towards Improved Borrower Protection And Increased Regulation In The Moneylending Industry

Last Updated: December 17 2018
Article by Doreen Sim and Dawn Tong

Introduction

The Moneylenders Act was introduced in 2008 to provide protection to vulnerable borrowers who are susceptible to exploitation by moneylenders. The latest step in this effort is through the implementation of the Moneylenders (Amendment) Act 2018 (the Moneylenders Amendment Act) which introduces changes aimed at:

  1. giving better protection to borrowers;
  2. strengthening the regulation of moneylenders; and
  3. professionalising the moneylending industry.

The changes will be implemented in two phases with the first phase of the amendments becoming effective as of 30 November 2018 – these changes are mainly targeted at meeting the objectives in (a) and (b) above. The next phase of the changes (which is focused on professionalising the moneylending industry) is scheduled to occur in the first quarter of 2019.

This article will discuss the main changes introduced by the Moneylenders Amendment Act.

Better Protection for Borrowers

Aggregate Loan Caps

To prevent individual borrowers from over-borrowing, the Moneylenders Act now prescribes aggregate loan caps to set an overall limit on the total amount of unsecured loans that an individual may obtain from all moneylenders combined. The newly introduced caps are as follows:

  1. no more than S$3,000 for a Singapore Citizen or Permanent Resident with an annual income of less than S$20,000;
  2. no more than S$1,500 for a foreigner residing in Singapore with an annual income of less than S$10,000;
  3. no more than S$3,000 for a foreigner residing in Singapore with an annual income of at least S$10,000 and less than S$20,000; and
  4. no more than six times of an individual's monthly income for all other Singapore Citizens, Permanent Residents and foreigners residing in Singapore.

This is in contrast to the loan caps prescribed under the old regime which only limited the amount of unsecured loans that an individual may borrow from a single moneylender and which did not prevent an individual from taking loans from multiple moneylenders and consequently becoming over-indebted despite the restrictions.

Provision of Information relating to Borrowers

To facilitate the implementation of the new aggregate loan caps, a regulatory framework has been established which requires moneylenders to do the following:

  1. obtain a credit report on the borrower from the Moneylenders Credit Bureau (the MLCB) prior to granting any loan;
  2. submit accurate information relating to the Borrower to the MLCB; and
  3. provide timely updates to the MLCB as and when the borrower repays the loans.

The new framework also requires both the MLCB and licensed moneylenders to strengthen the confidentiality, security and integrity of data pertaining to borrowers.

In addition, a self-exclusion framework has also been introduced to help borrowers regulate their borrowing behaviour and participate in debt assistance schemes. Under this framework, licensed moneylenders are prohibited from making any loans to any individual who has applied for self-exclusion.

The foregoing measures will evidently enable moneylenders to make more informed and responsible lending decisions and consequentially, will afford better protection for borrowers.

Strengthening the Regulation of Moneylenders

Expansion of Registrar's Powers to Exclude Undesirable Persons

Under the old regime, the Registrar of Moneylenders (the Registrar) had the power to revoke, suspend or refuse to issue or renew a moneylender's licence if, amongst other grounds, he is not satisfied as regards the qualification, experience or character of an individual applicant or a director, partner or substantial shareholder of a corporate applicant or any person responsible for the management of the moneylending business. With the changes introduced by the Moneylenders Amendment Act, this power has now been expanded to include persons who are currently employed or engaged, or whom a moneylender proposes to employ or engage, to assist in the moneylending business.

Under the old Moneylenders Act, a moneylender had to obtain the Registrar's approval after a person becomes a substantial shareholder or changes his substantial shareholding. In contrast, pursuant to the Moneylenders Amendment Act, a moneylender is now required to obtain the approval of the Registrar before a person can become a substantial shareholder or change his substantial shareholding.

With the foregoing expansion of the Registrar's powers, the chances of having undesirable characters entering into the moneylending industry will be reduced.

Prevention of 'spare licences'

Under the old Moneylenders Act, it was possible for a moneylender to circumvent the regulations by holding 'spare licences' which it can use if its original licence is revoked or suspended. Under the new regime, the Registrar can revoke or suspend a licence if a moneylender fails to commence its new business within 6 months upon the issuance of a licence. This will prevent a moneylender who is not actively operating a moneylending business from holding on to a spare licence.

Tightening Requirements on Loan Contracts

The new Moneylenders Act prescribes more mandatory requirements for loan contracts. For example, a moneylender will now be in breach of the Moneylenders Act if the loan contract does not truly specify the late interest rate or fees payable or if the loan contract contravenes regulatory caps on interest, late interest or fees. The Moneylenders Act also provides that if a moneylender breaches the prescribed caps on fees, interest and late interest, the loan contract will not be enforceable and any guarantee or moneys paid out by the moneylender thereunder will not be recoverable in any court of law.

Professionalising the Moneylending Industry

When the second phase of the changes under the Moneylenders Amendment Act comes into force, licensed moneylenders will, amongst other things, be required to:

  1. be incorporated as companies limited by shares with a minimum paid-up capital of S$100,000; and
  2. submit annual audited accounts to the Registrar to improve transparency and accountability.

Conclusion

In essence, the changes implemented or to be implemented under the Moneylenders Amendment Act will provide safer access to unsecured credit by giving better protection to borrowers and regulating and professionalising the moneylending industry.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
22 Jan 2019, Seminar, San Francisco, United States

Dentons is pleased to offer a full day of classes, just in time for the California MCLE compliance period deadline of January 31, 2019.*

23 Jan 2019, Seminar, Los Angeles, United States

Dentons is pleased to offer a full day of classes, just in time for the California MCLE compliance period deadline of January 31, 2019.*

24 Jan 2019, Other, New York, United States

Join Dentons’ Health Care Partner Lori Mihalich-Levin and White Collar & Government Investigations Counsel Christine Genaitis as they lead conference sessions at AHLA Academic Medical Centers and Teaching Hospitals Institute.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions