Licensed moneylenders face the prospects of tighter lending rules from late next year.
The authorities are looking to set up a Moneylenders Credit Bureau by then, which money- lenders must use to run compulsory credit checks on potential borrowers.
Lending caps will kick in a year later. This means the total amount a person can borrow will be fixed, regardless of how many moneylenders he borrows from.
It is understood that these details were disclosed by the Law Ministry when it sought views from interested parties on the credit bureau last week.
But the ministry declined to give further details. Its spokesman said: "We are currently reviewing the moneylending regulatory regime and we will share more information when ready."
The setting up of the bureau was first announced by Senior Minister of State for Law Indranee Rajah in Parliament last month, when the ministry's annual budget was debated.
Besides using the bureau to curb lending, the authorities are likely to use the data collected to track industry trends and improve controls over the sector, said a source, adding that no taxpayer money will be involved in setting up and running the bureau.
The ministry is understood to have made clear to prospective operators that they would bear the full cost of setting up and running the bureau, by charging moneylenders and borrowers.
Although licensed moneylenders give out less than 1 per cent of consumer loans, the sector has come under recent fire for high interest rates and service fees.
Several MPs such as Mr David Ong, Mr Lim Biow Chuan and Mr Zainal Sapari have called for tighter controls on these moneylenders in the past months, noting late payment interests amounted to a whopping 40 per cent per week.
The ministry said it has stopped issuing new licences for moneylenders since 2012 and safeguards like interest rate caps exist for borrowers earning less than $30,000 a year. There were 209 licensed moneylenders as at 2012.
Mr David Poh, president of the Moneylenders' Association of Singapore which has more than 150 members, said compulsory credit checks will not pose problems for the industry. "Some of us are already doing it," he said.
He is worried about possible curbs on interest rates and charges. "If the interest is too low, it will not be viable (for us). We need to have a certain percentage, we must be a bit more expensive than the banks," he said.
Lending caps should kick in earlier, feels Mr Zainal. "Two years is a bit long... It could have been earlier, perhaps by the middle of next year," he said. "It will be good if the ministry could explain the reason behind those deadlines."
At least one borrower does not mind some curbs. "If I cannot control myself, I don't mind letting the Government control how much I can borrow," said Mr Lee, a taxi driver in his 50s. He declined to give his full name as he does not want his family to know he borrows from moneylenders occasionally to bet on 4-D and Toto, spending about $300 each week.
This article was published on April 21 in The Straits Times.
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