Second Reading Speech on Moneylenders (Amendment) Bill 2008 by Senior Minister of State Assoc Prof Ho Peng Kee
18 Nov 2008 Posted in Parliamentary speeches and responses
- Mr Deputy Speaker, Sir, I beg to move, “That the Bill be now read a Second time”.
Objective of Bill
- Sir, the Moneylenders Act was enacted in 1959, about 50 years ago. Amendments have been few and far between, primarily focusing on enhancing the provisions that tackle unlicensed moneylending or loansharking. The Act was intended as a piece of social legislation to safeguard what we would call, “small-time borrowers” from unscrupulous moneylenders. Hence, its chief concern was the charging of exorbitant interest. The lenders then were also essentially small-scale operators.
- Sir, the moneylending landscape has changed significantly over the years. As at end of last year, there were 169 licensed moneylenders. Whilst the majority were sole-proprietors, there were also partnerships as well as companies. A total amount of $98 million was lent last year, to a range of borrowers in varying amounts.
- Sir, as business modalities evolved, the framework of the Act became outdated. In response, the approach taken was to exempt some categories of lenders from its ambit. These are termed “exempt moneylenders” and include companies that lend solely to businesses or to their own staff. The number of exemptions given over the years has increased, standing at 188 at the end of last year.
- Hence, the Ministry of Law and the Registry of Moneylenders conducted a holistic review of the Act to see how the moneylending regime can be improved. These amendments are a result of this review. They take into consideration the feedback we had received from a public consultation on an earlier version of the Bill.
- Sir, in view of the comprehensive changes, the Bill repeals and re-enacts the Moneylenders Act. In general, these amendments will introduce a more flexible and progressive approach to the regulation of moneylending to keep pace with the modern credit economy, whilst taking into account the social policy on access to credit; in other words, a modern framework that serves to strike a proper balance between regulating licensed moneylenders and safeguarding the interests of borrowers. Specifically, they clarify the scope of moneylending activities to be licensed, modernise moneylending operations, enhance protection for borrowers, tighten the regulatory framework giving the Registrar of Moneylenders more powers to act against errant moneylenders and introduce new measures to tackle unlicensed moneylending.
- Let me now take the House through the salient features of the Bill.
Clarifying the scope of moneylending
- Part I of the Bill clarifies the scope of moneylending. All moneylenders who grant secured and unsecured loans to members of the public will be licensed and regulated. Some of the moneylenders previously granted exemptions but who come within the scope of moneylending will now be regulated under the new licence regime. In addition, the list of excluded moneylenders has been expanded to cover, for example, lenders who grant solely staff loans or lend solely to corporations, limited liability partnerships, trustees of REIT, and accredited investors within the meaning of s4 of the Securities and Futures Act. Excluded moneylenders will not be required to apply for a license or an exemption under the Act.
- Sir, Clauses 35 and 36 empower the Minister to grant or extend exemptions from any or all of the provisions of the Bill, to impose or vary conditions of exemption, and to revoke the whole or part of any exemption where necessary, and to grant class exemptions.
- Under the new framework, the Minister’s power of exemption will be of a residual nature, for loan activities that may not be specifically excluded but for which we have no intention to regulate, e.g. loans to high net worth individuals for transactions which do not fall within the social policy concerns. The changes will provide greater certainty to the industry, and remove the need for companies to apply for exemptions for lending activities which do not need to be regulated.
Modernising the Licensing Regime
- In tandem with the new framework, the licensing regime has been modernised.
- Owing to its origin as a piece of social legislation to regulate small operators, the current Act has tight controls on location. In recognition of the function of moneylending activities in the modern credit economy, licensed moneylenders will be allowed to operate branches. In line with allowing licensed moneylenders to operate from more than one location, clause 10 requires a person to obtain the approval of the Registrar to carry on moneylending business at any place. The circumstances under which the Registrar will not grant his approval, and may revoke or suspend any such approval are also set out.
- The Act currently imposes severe restrictions on advertising by licensed moneylenders. This is an unnecessary restriction in today’s context and will be lifted under the Bill. With more information in the marketplace, borrowers will be able to make better-informed decisions. Nevertheless, any advertisement must be accurate and should not mislead. Hence, under clause 16, it is an offence for a licensed moneylender to knowingly or recklessly issue or publish any advertising or marketing material in any form that is false or misleading. The Registrar may issue relevant directions to regulate advertising and marketing activities.
Enhancing the Registry of Moneylenders’ Regulatory Powers And Giving Greater Protection to Borrowers
- Sir, at the same time, the Act gives greater protection to borrowers and strengthens the regulatory framework and enforcement tools available to the Registrar.
- On giving borrowers greater protection, certain requirements have been sharpened. Clause 19 requires a licensed moneylender to inform a borrower or his agent in writing, before the grant of a loan, of the terms and conditions of the loan. Clause 20 requires the licensed moneylender to provide a written loan contract to the borrower, and for the contract to be explained in a language that the borrower understands. At Committee stage, I am making an amendment to extend this protection to a surety, if any, which was omitted as a result of a drafting oversight. Clause 21 requires the licensed moneylender to supply statements of account to borrowers in accordance with the specified requirements. One such requirement will be that borrowers must be furnished a statement of account without charge at least twice a year. Clause 17 prohibits the grant of loans if the borrower had not first applied in writing to the licensed moneylender for the loan. This will deter unsolicited loans.
- Clause 22 empowers the Minister to prescribe the types or amounts of the costs, charges and expenses that a licensed moneylender may impose in respect of every loan granted by him. Any amount other than or in excess of the permitted fees will be unenforceable and may be recovered by the borrower, as a debt or by way of set off against the loan and any interest, late interest and permitted fees payable.
- Sir, on enhancing the regulatory framework and enforcement tools, Clause 25 gives the Registrar or an officer authorised by him the power to enter premises used or believed to be used by a moneylender to carry on business in order to inspect the premises and any book, record or other document found on the premises. The moneylender will also be required to provide to the officer information or documents. Clause 5(4) empowers the Registrar to issue a licence with conditions and clause 26 empowers him to issue directions to a moneylender, whether licensed or exempt under the Bill, for the carrying out of the provisions of the Bill.
- Clause 37 empowers the Minister to make rules for the purposes of the Bill, which may apply to any moneylender, whether licensed or exempted under the Bill. The rules may be general or relate to specific classes or descriptions of moneylenders, and may make different provisions for different classes or descriptions of moneylenders. Clause 23 gives the Minister the discretion to prescribe the maximum rate of interest that a licensed moneylender may charge for any loan granted. To that end, the Minister intends to prescribe rules to retain the existing interest rate caps for personal loans of $3,000 and below so as to give some protection to borrowers with small or no income. At the same time, for other cases where the rules do not apply, Clause 23 authorises a court to re-open a moneylending transaction and give the borrower relief where the interest is excessive and the transaction is unconscionable or substantially unfair.
- Finally Sir, the Act introduces two further measures to counter loansharking, strengthening the slew of measures we have already put in place.
- The first is this. Currently, persons who are convicted under Section 33 of the Act for harassment activities which result in property damage or persons being hurt are liable to be caned. In contrast, the instigators of such harassment activities are not liable for caning under that section. Clause 28 re-enacts section 33, but extends the punishment of caning to those who instigate or direct the harasser to commit the acts of harassment. There is no reason why those higher up the hierarchy of a loansharking syndicate should not also be similarly punished for the despicable acts of those they use to carry out their directions. They are equally if not more culpable.
- The second measure is to extend the existing presumption in section 35C, whereby a person whose bank account or ATM card is used to collect debts by an unlicensed moneylender is presumed to have assisted in the conduct of the business of the unlicensed moneylender. Clause 14 will extend the current presumption to cover a situation where telecommunications services such as a handphone or pager line are so used. This is intended to disrupt the infrastructure of loansharking syndicates, thereby hampering their attempts to evade detection.
- Sir, I beg to move.
Last updated on 27 Nov 2012