MAS bars remittance firms from lending money from Sept 10
Move that kicks in from Sept 10 closes off regulatory loophole
Remittance firms will be barred from lending money from Sept 10, as the authorities move to better protect consumers - many of them foreign domestic workers here - and close off what industry observers say is a regulatory loophole.
The prohibition notice issued by the Monetary Authority of Singapore (MAS) comes ahead of the new Payment Services Act that bans such activities.
The law is likely to kick in late this year.
A spokesman for the authority said yesterday it is "not the intent of the MAS" to allow licensed remittance firms to conduct consumer lending.
Monday's notice will not affect existing loans, including restructured and refinancing loans. It follows a review that the authority announced last October.
The Straits Times had reported about the Toast Me remittance licensee in Lucky Plaza granting cash advances with interest to maids.
Industry observers said it is unusual for remittance firms to offer loans when their main role is to transmit money overseas.
But they noted some might be exploiting a loophole in the regulations as they are not licensed moneylenders under the oversight of the Law Ministry's Registry of Moneylenders.
Mr Barakath Ali, representing chairman for The Remittance Association (Singapore), said it welcomes MAS' clear directives.
"Before, we had a bit of grey area. Now we are much more clear," said Mr Ali, who has been in the remittance business for 15 years.
Remittance licensees who fail to comply with any requirement specified in a written MAS direction could be fined up to $25,000 and/or jailed for up to 12 months.
More foreigners have been borrowing from licensed moneylenders, with 35,000 taking out such loans in the first half of last year, a huge increase on the 7,500 for all of 2016.
New loan caps introduced by the Government to tighten moneylending rules to protect foreigners living and working here have caused some borrowers to turn to unlicensed sources.
The MAS said it issued the prohibition notice after feedback from the public. ST understands the complaints were mainly over the high interest rates charged - touching 10 per cent a month.
Toast Me founder and chief executive Aaron David Siwoku told ST yesterday: "We have already informed MAS that Toast Me will be in compliance of the new regulations by the deadline."
ST understands the authorities have received complaints centring around Toast Me, which got its remittance licence in 2016.
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