Recent changes to the law now allow licensed moneylenders in Singapore to disclose borrower information to a broader range of third parties for credit checks. Under the new amendments, moneylenders can share borrower details with authorized credit bureaus, which can then provide additional insights on an applicant’s creditworthiness and debt status. This adjustment is expected to facilitate more comprehensive credit checks and help moneylenders make informed decisions when granting loans.
Previously, licensed moneylenders faced limitations in sharing data under the Moneylenders Act. Currently, only the Moneylenders Credit Bureau (MLCB), a designated bureau, can provide credit reports due to restrictions on disclosing borrower identification numbers. This lack of flexibility has hindered the accuracy of credit assessments, potentially enabling individuals to over-borrow by withholding or providing inaccurate credit information.
To ensure responsible information sharing, the extent of borrower information that can be disclosed will be limited to what is necessary. For instance, when purchasing a credit report from a prescribed credit bureau, the loan applicant’s identification number will be required.
In addition to credit bureaus, licensed moneylenders will also be allowed to share borrower information with third parties engaged in IT support or debt recovery. Furthermore, borrower information may be shared with prescribed persons for purposes related to the welfare and protection of applicants, borrowers, and sureties.
The amendments also empower licensed moneylenders to obtain records from public agencies to verify the accuracy of information provided by loan applicants. Prescribed persons, initially social service agencies assisting borrowers with debt consolidation loans or restructuring plans, will play a crucial role in facilitating effective negotiations and ultimately benefiting borrowers.
These changes represent a significant step forward in enhancing credit assessment processes for both borrowers and moneylenders in Singapore. By optimizing these regulations, a fairer and more transparent lending landscape can be established, promoting financial well-being and protection for all stakeholders involved.
What it means for borrowers:
More comprehensive credit checks: With the amendments to the Moneylenders Act, licensed moneylenders will be able to conduct more comprehensive credit checks on loan applicants. This means that borrowers may be subject to more rigorous checks to determine their creditworthiness and indebtedness.
Disclosure of borrower information: To obtain the relevant information from third parties such as credit bureaus, licensed moneylenders will be allowed to disclose details of the borrower. While this may allow moneylenders to make more informed lending decisions, it also means that borrowers’ personal information will be shared with more parties.
Over-borrowing prevention: The sharing of borrower information with credit bureaus other than the designated Moneylenders Credit Bureau (MLCB) may help prevent over-borrowing by individuals who choose to withhold or inaccurately declare their credit information. However, it may also result in more instances of borrowers being denied loans due to negative credit checks.
Limitations on borrower information disclosure: The extent of borrower information that can be shared will be limited to what is necessary. The borrower’s identification number may be disclosed when purchasing a credit report from a prescribed credit bureau, but other personal information will not be shared unnecessarily.
Increased protection for applicants, borrowers, and sureties: The amendments also allow licensed moneylenders to share borrower information with third parties engaged to provide IT support or to recover debts, as well as with any prescribed person “for purposes related to the welfare and protection of applicants, borrowers, and sureties.” This provides additional protection for borrowers and may help prevent predatory lending practices.
Verification of applicant information: Licensed moneylenders will also be able to obtain records from public agencies to verify the accuracy of information submitted by loan applicants. This may lead to more accurate lending decisions and help prevent fraud.
Overall, the amendments to the Moneylenders Act may have both positive and negative implications for borrowers. While more comprehensive credit checks and increased protection may be beneficial, the sharing of personal information with more parties and potential denial of loans may also be a concern.