Ministry of Law's measures to stem surge of moneylending to foreigners
Loan cap lowered from $1,500 for foreign workers earning less than $10,000 a year after huge surge in loans by licensed moneylenders
About 7,500 foreign workers took loans from licensed moneylenders here in 2016.
In comparison, in the first half of this year alone, 53,000 foreigners, mostly maids, borrowed from licensed lenders.
The startling figures were released by the Ministry of Law yesterday to highlight an alarming situation that has caused problems for employers, foreign domestic workers (FDWs) and employment agencies.
MinLaw announced new measures yesterday to check the massive surge of moneylending activities targeting foreigners in recent years.
They include a cap on loans to low-income foreigners and prohibiting the advertising of moneylending services to vulnerable groups such as FDWs.
MinLaw said it is prepared to take further action, including a complete ban on lending to foreign workers if necessary.
The self-exclusion framework was also launched yesterday to give foreign workers the option to bar themselves from taking up loans from licensed moneylenders.
They can do so by applying via the Moneylenders Credit Bureau using their SingPass account, or through a third party, such as their employer or employment agency, if they do not have a SingPass account.
Moneylenders are not allowed to issue loans to those who have opted for self-exclusion.
The New Paper reported in June last year that several moneylenders had dedicated services aimed at FDWs, with some webpages touting "easy approval loans" and LED boards flashing promotions.
At the time, Mr William Chew, the executive director of FDW Association for Social Support and Training (Fast), raised concerns about such activities.
Yesterday, he welcomed MinLaw's initiative but hoped that maids do not end up resorting to illegal moneylenders.
"About nine out of 10 FDWs who come here face financial difficulties at home, with their families depending on them to send back money," he told TNP.
"When a crisis hits the family, the FDWs need to send back extra cash, so they turn to moneylenders."
Mr Chew feels problems can arise when maids are allowed to borrow large amounts, so a loan cap will "prevent them from falling into huge debts that they may not be able to repay".
He said: "But if the cap is too low, they may turn to other means outside the law as they may genuinely need the money."
Under the changes, the loan cap for foreigners earning less than $10,000 a year is reduced to $500 from the previous $1,500.
For those earning less than $20,000, the cap remains at $3,000, while those earning at least $20,000 a year can borrow up to six times their monthly income.
MinLaw said the Ministry of Manpower will educate FDWs and employers on the new measures and continue outreach efforts to educate work pass holders on managing their finances.
Mr Tay Khoon Beng, managing director of Best Home Employment Agency, said MinLaw's initiative is aimed at helping FDWs, not to penalise them.
He said: "They will be able to borrow in the event of an emergency but will not be able to borrow in excess."
He also encouraged employers to be open to helping FDWs by communicating and advising them when they face financial difficulties at home.
Holland-Bukit Timah GRC MP Liang Eng Hwa said some of his residents had previously raised concerns about harassment after their maids borrowed money.
"The problem is availability of credit, which perhaps made FDWs borrow more," he said.
"I appreciate what MinLaw is doing, and the whole idea is to signal to moneylenders that they should not be targeting vulnerable groups like FDWs."
He added that employers also have a responsibility to check on their FDWs.
"Employers must be open to helping their employees by discussing and giving financial advice and help," he said.
"It is not that way now and this needs to change. It is better to know in advance to minimise problems.
"Not knowing until something happens is going to be worse."
Changes at a glance
CHANGES AT A GLANCE
With effect from today:
- Loan cap for foreigners earning less than $10,000 a year reduced from $1,500 to $500.
- Licensed moneylenders no longer allowed to accept foreigners as guarantors.
- Advertisements targeting foreign domestic workers no longer allowed.
- No loans to be facilitated or brokered by unauthorised third parties.
- Licensees are not allowed to refer borrowers to other moneylenders.
With effect from Aug 15:
- A licensed moneylender cannot lend to more than 300 foreigners or more than $150,000 at any one time, or more than 15 foreigners in any month, or more than 50 foreigners in any year.
Money management contacts for foreign workers:
Blessed Grace Social Services: 8428-6377
Adullam Life Counselling: 6659-7844
Arise2Care Community Services: 6909-0628
Association of Muslim Professionals: 6416-3960
One Hope Centre: 6547-1011