Re: Licensed MoneyLenders + Police Report = Licensed Loan Shark ? ;Straits Times 22/4
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Title: Not sharks, but their bites hurt
Source: Straits Times
Author: Janice Tai & Stacey Chia
Legal News Archive
FACTORY driver Andrew Pang thought his debt problems were solved when he turned to licensed moneylenders for loans.
But when he missed a payment deadline by a day, he felt the full brunt of their efforts to collect payment.
'They would come to my office every day and shout for me. My colleagues and bosses were all shocked and I was too embarrassed to face them,' he said.
Mr Pang, 45, owes $15,000 to legal moneylenders and loan sharks - 10 in all - but mostly feels the heat from the former.
Mr Pang is not alone. Those who borrow from authorised lenders said they are getting more aggressive in collecting debts. Because they are licensed, their employees or hired help may openly seek out the borrower in his workplace or home, unlike a loan shark or his runners who will not risk being caught.
According to the Registry of Moneylenders, which regulates more than 200 licensed players here, they can take steps to recover debts as long as these do not involve vandalism, violence and threatening behaviour.
As harassment falls in the grey area, some have exploited the ambiguity by hiring debt collectors to pressure their clients into paying.
One borrower, Mr Vincent Goh, 38, said debt collectors even faxed details of his $20,000 loan to the human resource department of the company he works for.
'Luckily, they merely warned me to settle my personal problems. It's okay for them to chase the debts but they are getting out of hand,' added the sales consultant, who noted that debt collectors also visited his house.
He has since lodged a police report against that particular moneylender.
Even if borrowers are not visited by debt collectors, they can expect letters demanding payment from lawyers engaged by licensed lenders.
Lenders may take further legal action which includes a writ of summons (to appear before the court) or writ of seizure (to seize and sell assets or property of a debtor).
With the police coming down hard on loan sharks, the licensed moneylending industry has grown over the past few years. As at the end of last month, there were 264 players, compared to 169 in 2007.
They draw borrowers who are shut out of loans from banks and who fear loan sharks. But their practices have made some borrowers uneasy.
'I don't know if what they are doing is illegal. But I approached a police officer and he said there was nothing he could do as they were registered companies, not loan sharks,' said a 41-year-old sales executive, who has borrowed about $20,000 from 12 licensed moneylenders.
Some charge exorbitant interest rates of up to 20 per cent, no different from those of loan sharks, while others do not explain clearly the terms of loans to borrowers.
To be sure, licensed moneylenders have been penalised. As of the end of last month, five have had their permits suspended, five have had their licences revoked and four have been prosecuted for breaching the law.
A spokesman for the Moneylender's Association of Singapore said it is aware that some moneylenders adopt illegal practices, and 'appropriate' measures have been taken.
But lawyers said it may be difficult to prove harassment in some cases.
Lawyer Peter Tio, from Cheo & Tio Advocates and Solicitors, said that multiple calls and visits to the borrowers' homes and offices 'may be annoying but I don't think it's harassment'.
Another lawyer, Mr Pratap Kishan from Kishan LLC, said he was unaware of any cases of harassment. 'I believe most are very careful and would not want to risk losing their licence,' he added.
Moneylenders The Straits Times spoke to said they hire debt collectors to visit offices only as a last resort. They also remind the collectors not to overstep legal boundaries.
One moneylender in Bugis said he chases for payment over the phone and works out new terms for those unable to pay, including giving them more time.
Sending a debt collector is done only when the debtor avoids his calls.
But some admit that illegal practices exist. A licensed moneylender in City Hall said that, at times, he resorts to violence because 'it is obvious that some have no intention of paying us back'.
The Moneylender's Association of Singapore noted that irresponsible borrowers may take loans from more than 10 moneylenders in a week, and the lenders typically lose 15-30 per cent of the total amount loaned out.
Checks with moneylenders reveal that bad debts average about $60,000 to $100,000 a year.
They said the frustration over mounting bad debts may have given rise to more cases of dubious tactics.
Though they can take legal action against borrowers, many are deterred by the cost. It may not be worthwhile to reclaim small loans, which is why some may resort to harassment.
Ms Wee Lay Ching, support group facilitator at One Hope Centre, said three-quarters of the problem gamblers who seek help come with problems related to harassment from licensed moneylenders. 'If the loan sharks get too overboard, our clients can call the police, but for licensed moneylenders, they are afraid to pursue the matter as they might have to incur legal costs if they take this up in court,' she noted.
'We are concerned because they are already facing much stress with their financial troubles. Coupled with excessive harassment from the moneylenders, that might just push them over the brink,' she added.
A spokesman for the Registry of Moneylenders said borrowers should exercise discipline and restraint and assess carefully their ability to repay, as businesses are allowed to take steps to recover an outstanding debt.
Said a moneylender in Bencoolen: 'At the end of the day, borrowers who know they cannot repay should stay away from borrowing, even from licensed moneylenders like us.
'We also have a business to run and have a right to get back our money,' he added.
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Legal lenders
Who can set up a moneylending business?
Applicants to the Registrar of Moneylenders for a moneylender's licence must fulfil conditions, such as:
•be above 21
•passed a test conducted by the Registry of Moneylenders with regard to the Moneylenders Act and its rules
•have placed a security deposit of $20,000 with the Accountant-General for every approved place of business
What is the interest rate they can charge?
Under the Moneylenders Rules 2009, the maximum rate is 12 per cent per annum for secured loans up to $3,000 and 18 per cent per annum for unsecured loans up to $3,000.
These rates apply if the individual borrower's annual income on the date of the grant of loan is less than $20,000.
For those whose annual income is $20,000 or more who wish to obtain a secured or unsecured loan (regardless of amount, subject to quantum caps), the interest rate is to be agreed upon between moneylender and borrower.
For borrowers whose income is above $20,000 per annum, the interest rate usually ranges from 2 per cent to 20 per cent per month, depending on the risk profile of the borrowers.
Prohibited practices include:
•Demanding SingPass usernames and passwords or keeping a borrower's NRIC or any other personal identification cards or documents
•Granting loans without exercising due diligence - for example, approving a loan over the phone
•Asking the borrower to sign on a blank Note of Contract
•People who come across such practices should report it to the registry.
For more information, visit
www.ipto.gov.sg
