Illegal moneylenders are not licensed by the Ministry of Law in Singapore to provide credit services. An illegal money lender will charge very high-interest rates and resort to unethical collection practices. It is not hard to identify a fraudulent dealer in the money lending industry with vigilance.
If you were wondering what illegal moneylenders in Singapore look like and how you can identify them, read on for more information about moneylenders who are prohibited to lend money as per the Money-lending Act (MLA).
What is a Licensed Moneylender?
Licensed moneylenders are exempted from the Act, which means they are allowed to provide credit services.
To be exempted under the Act, licensed moneylenders must:
- Be an individual or a corporation with at least two directors;
- Have at least S$200,000 in shareholders’ equity; and
- Have no history of previous offences.
According to the Moneylenders Act, licensed moneylenders must display a board outside their business premises with their license number, business name, and business address.
They are also required to provide borrowers with a document containing details of the loan repayment period, rates of interest charged on loan, and any other charges payable.
How to Identify Illegal Moneylenders in Singapore?
There are sure signs that you can look out for to identify illegal moneylenders in Singapore
Operating in Isolated Locations
They might be operating in very secluded, usually squatter areas that are hard for the police to reach.
A reputed and licensed money lender would have no reason to operate in a doubtful setting. It is therefore important to be mindful of the manner of operations of the lender you are thinking of borrowing from.
Requiring Borrowers to Pay ‘Key Money’
Key money is any money paid in advance, which does not give the borrower access to services.
It may be an administrative fee before allowing borrowers to take loans. Illegal moneylenders often ask for key money or other upfront payments to dupe the borrowers and make immediate gains.
Failing to Provide Clear Contract Terms
Unlicensed lenders often conduct business with verbal agreements or vague contract terms and conditions.
You must check if the terms and conditions offered by the moneylender are fair and reasonable.
Failing to Display License Number
Illegal moneylenders will not produce their license number when asked, as they do not have one. They will also avoid displaying signs outside their business premises.
Charging Extremely High-Interest Rates
Moneylenders who are not licensed can charge much higher interest rates than those who are, as they do not fall under the regulations set by the government.
Licensed moneylenders are capped at 4 percent per month, while unlicensed money lenders can charge up to 60 percent per annum.
Use Of Threats and Intimidation
Illegal lenders will often use threats and intimidation tactics to get borrowers to repay their loans. They may threaten borrowers with violence, imprisonment, or even death if they fail to repay their debts.
Collecting Debts Under False Pretense
Some illegal moneylenders resort to deceptive practices, such as pretending to be licensed moneylenders to collect money from borrowers.
Borrowers should therefore be wary of people who approach them and ask for loans in unusual circumstances.
Operating Outside of Business Hours
Illegal moneylenders will often avoid doing business during the day, as they do not want to be caught by the authorities.
They will only operate at night or on weekends when there is less chance of getting caught.
Asking for Extra Payments
Some illegal lenders may ask for additional payments, such as processing or administrative fees, which can double the original amount borrowed.
These charges are not legally required and should be an immediate red flag for dealing with illegal moneylenders.
Having a Negative Reputation
If you do some research on the internet, you will likely find negative reviews about illegal moneylenders.
They often have a reputation for being unprofessional and unethical in their business practices.
Tips When Dealing with Moneylenders
Check if the Lender is Licensed
You can check the legitimacy of a money lender by visiting the website of the Registry of Moneylender. Licensed moneylenders must display their license number on all advertising materials, such as websites and loan contracts.
Don’t Borrow More Than You Can Repay
You must not borrow more than you can afford to repay, as this will only add to your financial woes.
Even if you are desperate for cash, borrowing more than you can repay will only lead to bad credit ratings and further debt problems.
Do Not Let Moneylenders Pressure You
Many borrowers who have fallen into debt traps often say that they borrowed from illegal moneylenders because they were pressured by family members or colleagues at work.
Don’t let anyone pressure you into borrowing money from illegal lenders – this is a surefire way to get into trouble.
Understanding Credit is essential so that you won’t fall into debt. Learn the different types of loans you can apply for and manage your credit score well.
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