Credit checks: Moneylenders now have increased authority to disclose borrower information to multiple parties due to recent changes in the law.
These modifications, which were passed by Parliament on Nov 22, allow licensed moneylenders to share borrower details with a broader range of third parties, including specified credit bureaus. By doing so, these credit bureaus can provide additional insights into an applicant’s creditworthiness and debt, empowering moneylenders to make more informed decisions when granting loans.
Under the current Moneylenders Act, licensed moneylenders face limitations on data sharing. However, these restrictions have hindered comprehensive credit checks on borrowers, as highlighted by Senior Parliamentary Secretary for Law Rahayu Mahzam. To address this issue, licensed moneylenders will now have the freedom to obtain credit reports from credit bureaus beyond the Moneylenders Credit Bureau (MLCB), the designated bureau currently used for this purpose.
This new provision aims to prevent over-borrowing by individuals who deliberately withhold or inaccurately declare their credit information. It is important to note that the extent of borrower information shared will be strictly limited to what is necessary. For example, when purchasing a credit report from a prescribed credit bureau, the identification number of the loan applicant will be required.
Apart from credit bureaus, licensed moneylenders can now also share borrower information with specific third parties responsible for IT support or debt recovery. Additionally, licensed moneylenders have the authority to share borrower information with any prescribed person “for purposes related to the welfare and protection of applicants, borrowers, and sureties.”
These amendments also permit licensed moneylenders to access records from public agencies to verify the accuracy of information provided by loan applicants. When queried about who these prescribed persons are, Minister of Law (MinLaw) Rahayu Mahzam stated that the ministry plans to collaborate initially with social service agencies that have been assisting borrowers in negotiating debt consolidation loans or restructuring plans with licensed moneylenders. The disclosure of loan information to these agencies is critical for effective negotiation and ultimately beneficial for borrowers.
What it means for borrowers moving forward?
For borrowers who are considering taking out a loan from licensed moneylenders, the recent amendments to the Moneylenders Act mean that their personal information may be shared with third-party credit bureaus, IT support providers, and debt recovery agencies. Although this can enable licensed moneylenders to conduct more comprehensive credit checks – which can be beneficial for responsible borrowers looking to secure a loan – there are also potential risks to consider. Here’s what it means for borrowers in Singapore:
More comprehensive credit checks may be conducted: Licensed moneylenders are now able to access credit reports from a prescribed list of credit bureaus, allowing them to obtain a more accurate picture of a borrower’s creditworthiness and indebtedness. This could be beneficial for responsible borrowers who are looking to secure a loan at a reasonable interest rate.
Personal information may be shared with third parties: Under the amended law, licensed moneylenders are able to share borrower information with third parties engaged to provide IT support or recover debts, as well as any prescribed person “for purposes related to the welfare and protection of applicants, borrowers and sureties”. Borrowers should be aware that their personal information may be shared with these parties, and should take steps to protect their data accordingly.
Over-borrowing may be a concern: One potential risk of the recent amendments is that they may enable individuals to over-borrow by withholding or inaccurately declaring their credit information. As licensed moneylenders are now able to conduct more comprehensive credit checks, borrowers who have a history of borrowing beyond their means may be tempted to provide inaccurate information in order to secure a loan.
Borrower information sharing will be limited: According to Senior Parliamentary Secretary for Law Rahayu Mahzam, the extent of the borrower information that can be shared will be limited to what is necessary. In the case of purchasing a credit report from a prescribed credit bureau, for example, the disclosure of the identification number of the loan applicant will be necessary. Borrowers should therefore take comfort in the fact that licensed moneylenders will only be sharing information that is necessary for the purposes of conducting a credit check.
Public agency records may be accessed: The recent amendments to the Moneylenders Act also let licensed moneylenders obtain records from public agencies to verify the accuracy of information submitted by loan applicants. Borrowers should be aware that their personal information may be accessed in this way, and should ensure that they provide accurate information when applying for a loan.
In conclusion, the recent amendments to the Moneylenders Act have both benefits and potential risks for borrowers in Singapore. While they enable licensed moneylenders to conduct more comprehensive credit checks, borrowers should be aware that their personal information may be shared with third parties. It is therefore important for borrowers to take steps to protect their data, and to ensure that they provide accurate information when applying for a loan.
