Dark Side of Money Lending

As technology advances, the way we do things changes along with it. People used to have to personally go to the library for research, but now, all the information we need is available with a few simple taps on our smartphone, tablet or laptop. It cannot be denied that the increased connectivity with the rest of the world has brought us much greater convenience and efficiency. Sounds good, doesn’t it? Well… on the contrary, increased connectivity is not necessarily a good thing. Not when we’re talking about fraudulent activities such as illegal money lending.

Technology is a double-edged sword. It is true that the internet has allowed us much greater accessibility to information and people. But this also means that corrupt organisations have a much wider reach than ever before. In 2017, there was a sharp increase in the number of electronic harassment cases that caused the number of harassment cases by loan sharks in Singapore to skyrocket after reaching a 10-year low in just the previous year. Loan sharks are able to bait in large groups of unsuspecting victims simultaneously through mass texts and online advertisements. They are able to maintain their organisations by periodically roping in new runners (people who are responsible for harassing debtors for payment) by posting job advertisements on popular social media sites, promising applicants a job that can earn them hundreds of dollars in a single day. Many of their applicants end up going through with the job because of the high payout, despite the fact that it is illegal. For the sake of getting more customers, some loan sharks even go to the extent of creating websites that look legitimate so that borrowers will mistake them as legal money lending companies.

How to identify unlicensed money lenders.

The key to identifying unlicensed money lenders is to know how a licensed money lending company is supposed to operate.

  1. Licensed money lenders will ensure that you understand the contract.

According to the Moneylenders Act, money lenders are required to ensure that you fully understand all the terms and conditions you are agreeing to. They are obligated to answer all your questions and clear your doubts, and explain to you your interest rate, payment options as well as repayment duration.

2. Licensed moneylenders set your loan limit based on your annual income.
These are the amounts that money lenders are allowed to lend you based on your annual income:

  • Annual income S$20,000 or below —– up to $3,000.
  • Annual income greater than S$20,000 but less than $30,000 —– up to 2 months’ salart.
  • Annual income greater than S$30,000 but less than S$120,000 —– up to 4 months’ salary.
  • Annual income S$120,000 or above —– no set limit.

Licensed money lenders are not allowed to loan their customers any amount beyond the above criteria. If your money lender offers you a loan that is too good to be true, proceed with caution. You may be dealing with an unlicensed money lender.

3. Licensed money lenders will provide you with a contract.
Licensed money lenders are obligated to have you sign a contract that includes the interest rate, late fees, repayment duration, and everything else you need to know about your loan. Do not accept a loan without a written agreement. Loan sharks often take advantage of the fact they do not have a contract by increasing their interest rates as and when they please.

4. Licensed money lenders will not charge a monthly interest rate greater than 4%.
According to the law, the maximum interest rate a licensed money lender can charge you is capped at 4% per month. If they are found charging an interest rate beyond that, they can be persecuted and have their license revoked as a result.

5. Licensed money lenders can only charge 3 types of fees.
Besides the interest on your loan, money lenders are only permitted to charge late payment fees of up to $60 per month, administrative fees of up to 10% of your loan, as well as any legal fees that may be incurred. If your money lender tries to charge any more than that, you are entitled to file a complaint to the Ministry of Law for an investigation.

6. Licensed money lenders should have an office.
Money lenders need to have a legitimate office that has been registered on the Ministry of Law website. Be sure to double check if the company name matches the address listed. Almost all interactions between you and your money lender should take place there, including the process of signing the contract.

7. Licensed money lenders must be listed.
There is a list of licensed money lenders on the Ministry of Law website. This list is updated monthly, and it contains the name, address and license number of the money lending company. Unlicensed money lenders may try to pass off as licensed money lenders by using another company’s information, so be sure to check that the information they give you matches the information on the list. There is also a possibility that a licensed lender is not listed if they’ve only just received their license, in which case you can contact the Registry of Moneylenders at 1800-2255-529 to check.

If your money lender does not adhere to any of the above regulations, it would be wise to seek out another money lending company instead.

Conclusion

How do we put a stop to loan shark activities once and for all? Chances are, we can’t. The simple truth is that loan sharks wouldn’t exist if people never chose to seek them out for help. It is true that people who approach loan sharks typically do it out of desperation or ignorance, but nevertheless, it is a choice of their own volition. Our best bet in preventing more people from falling into their traps is to spread greater awareness. We can’t possibly hope to control the actions of everyone around the world, but we can only help them make an informed decision.

Always choose the legal option. If you can’t get your loan approved at the bank, consider licensed money lenders instead of turning to loan sharks.