What Is The Money Lenders Act About?


If you have never done so, you may feel apprehensive when applying for a loan with a licensed money lender. You may be worried about not getting the money you need or being charged high interest rates.

Or you may even dread experiencing abusive treatment or harassment at the hands of your money lender.

We have good news for you: The Moneylenders Act in Singapore was put in place to protect borrowers like you. Under its rules and regulations, all licensed money lenders are prohibited from engaging in unlawful practices against borrowers.

This blog post outlines essential things you should know about the Money Lenders Act.

Money Lenders Act: What Is It?

The Moneylenders Act is a set of regulations devised by the Registry of Moneylenders in 2008.

The primary purpose of the Moneylenders Act is to regulate Singapore’s moneylending industry to protect borrowers’ moneylending rights.

The Ministry of Law recognised the need for a system to eliminate unfair moneylending practices such as high interest rates, uncapped borrowing amounts, and unfair debt collection methods.

The Act clearly lays down laws related to licensing, borrower’s information protection, lending limits, professional conduct, and other lending-related matters.

Rules Regarding The Conduct Of Money Lenders

Some of the fundamental rules concerning the conduct of licensed money lenders are as follows:

      1.  Business Premise Signage

All licensed money lenders in Singapore must display their business names as written in their original license documents. The Moneylenders Act also requires them to write “Licensed Moneylender” with their names in English.

Licensed money lenders that fail to comply with this rule may get charged up to $5,000.

      2.  Transparency In Loan Terms And Conditions

The Moneylenders Act requires all licensed money lenders to reveal the complete terms and conditions of their loans to borrowers before giving out the money.

This information needs to be presented in a document to the borrower or a representative, which needs to be signed by him or her. This document serves as proof that all terms and conditions of the loan were communicated before the loan was granted.

      3.  Provision Of Necessary Documents

As per the Moneylenders Act, it is the responsibility of a licensed money lender to provide a copy of the loan agreement and account statement to borrowers after they sign the loan agreement.

Besides, the money lender is legally bound to provide receipts of all monthly repayments made during the loan tenure (or whenever the borrower requests for them).

      4.  Strict Compliance With Fair Practices

Money lenders must adhere to fair practices and show courteous behaviour when interacting with their clients. Whether it’s the application process or debt collection, money lenders must avoid harassing, coercing, and intimidating borrowers.

They also are not allowed to mislead borrowers into taking a loan beyond their repayment capacity.

      5. Protection And Safe Return Of Personal Documents

Licensed money lenders in Singapore can only temporarily keep your documents such as your NRIC, employment pass, or passport for application purposes. Once the loan is granted, they must return your documents.

Also, they can’t ask for sensitive data such as your Singpass or email ID and password. Don’t agree to such requests.

You have every right to walk out of such discussions. In fact, you may even report them to the Registry of Moneylenders or the police if a money lender asks you for sensitive information or fails to follow the rules mentioned above.

Going against the Moneylenders Act and its regulations is punishable by hefty fines, jail time, or both.

What Are The Caveats Of Money Lenders To Take Note Of?

Borrowers must beware of “caveats” when signing a loan agreement with a money lender. Some money lenders may include the right to lodge a caveat at the Singapore Land Authority (SLA) in case of non-payment, which could be risky.

A caveat is a legal application that is filed against a property when prospective buyers want to secure their advance deposit. The caveat alerts the SLA that a real estate deal is currently underway between two parties:

  • Caveatee meaning the application filer
  • Caveator meaning the property owner

So any further dealings related to that property are put “on hold”.

This means money lenders can use such caveats to their advantage and hold your transaction until your debt has been repaid. You may be forced to sell your home to the money lender or transfer sales proceeds to compensate for its loss.

This puts you at risk of losing extra money. So be sure to check for caveat clauses in your loan agreement.

Now, let’s look at some of the rights of licensed money lenders in Singapore.

What A Money Lender Is Permitted To Do?

Here is what the Moneylenders Act permits licensed money lenders to do:

Meet Borrowers In Person

The Moneylenders Act permits licensed money lenders to meet borrowers face to face during the loan application process. In fact, they are legally obliged to meet borrowers at least once before granting them a loan.

So if a money lender agrees to give you a loan over the phone without an in-person meeting, it is either not licensed or breaking the law. Report the lender to the relevant authorities immediately.

Follow Money Lender Interest Rate Limits

Licensed money lenders’ interest rates are usually higher than those of banks. However, the Moneylender Acts only allows licensed money lenders to charge a maximum of a 4% interest rate.

If a money lender tries to charge you anything higher than a 4% interest rate per month, remember that it is going against the law. You must not sign any loan agreements exceeding the 4% limit.

Also, be careful if a licensed money lender offers you much lower interest rates. This could most likely be a scam. Make sure you check its license before signing a loan agreement with the lender.

Charge A Fixed One-Time Fee

In addition to the interest rates, licensed money lenders can legally charge an administrative or processing fee for their services.

But make sure that the administrative fee doesn’t exceed 10% of the principal amount. It also should not be paid more than once.

Impose A Fee For Delayed Payments

Borrowers are always advised to make monthly repayments within the due date to avoid penalties or fines.

Remember that licensed money lenders can charge a maximum of $60 per month for late payments. Plus, they can also legally charge a 4% interest rate on all late payments.

Important: Licensed money lenders can also charge an additional legal fee of $100 if they employ a lawyer for late repayment collection.

Put Up Advertisements On Certain Platforms

Licensed money lenders are allowed to advertise their moneylending services through three mediums. Hence, they are allowed to:

  1. Place ads (flyers, brochures, or posters) inside their official work premises or on the walls outside
  2. Use online or print business directories for promotion
  3. Display ads and loan deals on their official websites

Remember, a licensed money lender will never call, email, or text you to promote their lending services.

Now, let’s look at what the Moneylenders Act prevents them from doing.

Prohibited Practices For Money Lenders

The Moneylenders Act protects borrowers from ill-treatment and unfair lending practices. Here are some of the things licensed money lenders are prohibited from doing:

  • Money lenders in Singapore are not allowed to operate without a money lender’s license issued by the Registry of Moneylenders.

So make sure you check a money lender’s license before applying for a loan. You can verify a licensed money lender’s license at the Registry’s website. The money lender’s license will also be displayed at its office premises.

  • Licensed money lenders are not allowed to use abusive language or talk disrespectfully to borrowers. Moreover, they cannot harass or threaten you or your friends and family when collecting payments.
  • Licensed money lenders cannot use calls, SMS, emails, billboards, or social media ads to promote their lending services. They can only use the abovementioned legal ways of advertising.
  • They can’t grant you a loan without meeting you face to face at least once. If a money lender agrees to grant you a loan over email or a phone call, it is most likely be a scam.
  • They can’t retain any of your personal documents. This is illegal. You must report them to the Registry at 1800-2255-529 or contact the police if it happens to you.
  • Licensed money lenders can’t hold any part of the principal amount of your loan for any reason. It must be transferred to you after approval within a reasonable time.
  • They can’t charge interest rates more than 4% per month.

What A Money Lender Can Do If You Can’t Pay The Loan

It’s not unusual to face delays in repaying loans. But you have to deal with the consequences when a loan agreement is legally binding.

If you can’t repay your loan for any reason, a licensed money lender can legally sue you, issue a demand letter, and charge you late interest rates on delayed payments.

Still, the Moneylender Act prohibits it from using abusive tactics such as harassment, stalking, violence, or the damaging or seizure of property.

However, it is legally entitled to reach you or your family members for settlement politely.

Now, let’s look at the limits on principal loan amounts as stated in the Moneylenders Act.

How Much Can You Borrow From A Money Lender?

You can borrow a sizeable amount when it comes to taking a loan from a bank. However, the Money Lenders Act restricts licensed money lenders to lending limited loan amounts based on the borrower’s salary range.

The limits are as follows:

A Singapore citizen or permanent resident earning less than $20,000 per year (but at least $10,000 a year) can’t get a loan of more than $3,000.

A foreigner residing in Singapore earning less than $10,000 per year can’t get a loan of more than $500.

If a foreigner earns more than $10,000 and less than $20,000 per year, they can get a maximum loan of $3,000.

You can get a loan equal to six times your monthly salary if your annual income equals or exceeds $20,000 per year. Your residency status doesn’t matter in this case.

Do you qualify for a licensed money lender’s loan? Licensed money lender Katong Credit offers a range of loans at affordable rates.

Contact our loan officers today or apply for a loan now. It will only take you five minutes.

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