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Loan limits for foreign workers slashed; licensed moneylenders face new restrictions

SINGAPORE — Eight months after the Government decreed that low-income foreign workers can take a maximum loan of S$1,500 from licensed moneylenders, the limit has been further slashed to S$500 in a bid to stem a surge in borrowing over the last three years.

The new loan limits apply to foreign workers who earn less than S$10,000 a year, which will affect mostly foreign domestic workers.

The new loan limits apply to foreign workers who earn less than S$10,000 a year, which will affect mostly foreign domestic workers.

SINGAPORE — Eight months after the Government decreed that low-income foreign workers can take a maximum loan of S$1,500 from licensed moneylenders, the limit has been further slashed to S$500 in a bid to stem a surge in borrowing over the last three years.

The rules apply to foreign workers who earn less than S$10,000 a year, which will affect mostly foreign domestic workers.

Besides restrictions targeted at them, the Ministry of Law (MinLaw) also unveiled on Monday (July 15) a new set of measures that licensed moneylenders must comply with.

FURTHER RESTRICTIONS

Licensed moneylenders will be banned from:

  • Accepting foreigners as guarantors

  • Targeting low-income foreigners in their advertisements

  • Granting loans brokered by anyone without the required authorisation

  • Cross-referring borrowers to each other

The loan limits and new restrictions on licensed moneylenders will take effect from Tuesday.

From Aug 15, moneylenders will also not be allowed to:

  • Lend to more than 300 foreigners at any one time

  • Lend more than S$150,000 in total loans to foreigners at any one time

  • Lend to more than 15 foreigners in any month

  • Lend to more than 50 foreigners in any year

Moneylenders who have busted their limits before these new restrictions take effect will not be subjected to any penalties.

However, they will not be allowed to continue lending to foreigners until their loan books have dropped below the new limits.

A self-exclusion framework was also launched on Monday. Licensed moneylenders cannot lend money to anyone who applied for self-exclusion to the Moneylenders Credit Bureau.

WHY THE RESTRICTIONS?

In a media release on Monday, MinLaw said that the number of foreigners borrowing from licensed moneylenders has “risen sharply” over the past three years.

  Year   Number of foreigners who
  borrowed from licensed moneylenders
  First half of 2019   53,000
  Whole of 2018   55,000
  Whole of 2017   19,000
  Whole of 2016   7,500

To address the increase, MinLaw first imposed a loan cap on low-income foreigners in November 2018, where those whose annual income is below S$10,000 can borrow up to S$1,500.

Those who were found to have turned to unlicensed moneylenders will have their work pass revoked.

While these measures have slowed the rise in borrowing activities, the number of borrowers remains high, MinLaw said.

WHAT CAUSED THE SURGE?

Advertisements: Licensed moneylenders have been actively targeting low-income foreign workers, with advertisements that scream “Foreign Domestic Helpers Are Welcome”, and readily extending loans to them

Guarantors: Huge increase in low-income foreign workers acting as guarantors for one another, jumping from 50 in 2016 to 6,000 in 2018

Brokers: Some foreign workers acted as “brokers” for licensed moneylenders, by helping fellow workers apply for loans in exchange for a small commission. These acts are illegal and those found guilty can be fined up to S$20,000 and sentenced up to two years imprisonment.

To prevent foreigners from turning to unlicensed moneylenders, MinLaw said that the police will step up enforcement against such activities.

Related topics

money lending licence Ministry of Law foreign domestic workers foreign workers

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