Second Reading Speech by Senior Parliamentary Secretary Rahayu Mahzam on the Moneylenders (Amendment) Bill
22 Nov 2023 Posted in Parliamentary speeches and responses
Mdm Deputy Speaker,
- On behalf of the Minister for Law, I beg to move, “That the Bill be now read a Second time.”
- Mdm, the Moneylenders Act, or MLA, regulates the licensed moneylending industry to ensure that a balance is struck between protecting borrowers and facilitating efficient and effective business processes.
- The MLA was last amended in 2018, in part to introduce a designated credit bureau known as the Moneylenders Credit Bureau, or MLCB.
- With this, we made it mandatory for licensed moneylenders to submit borrower information to the MLCB, and to obtain a credit report of the loan applicant before granting a loan.
- Licensed moneylenders must also update the MLCB whenever borrowers repay their loans.
- The 2018 amendments have helped to professionalise the moneylending industry.
- To ensure we keep up with changes in our operating environment, the Registry of Moneylenders continues to engage the industry regularly to obtain feedback and identify areas for improvement.
- Today’s Bill proposes amendments that arose from these engagements and are part of MinLaw’s ongoing efforts to enhance the licensed moneylending industry.
- This Bill seeks to do three main things:
(a) First, improve data sharing and usage policies;
(b) Second, enhance MLCB’s functions through the sharing and use of data maintained by the MLCB; and
(c) Third, facilitate digitalisation in the licensed moneylending industry.
- The Bill also contains technical amendments to reduce ambiguity and increase operational efficiency for licensed moneylenders.
- Let me now elaborate on the key amendments in this Bill.
(A) Improve Data Sharing and Usage Policies
- First, the Bill introduces amendments to improve data sharing and usage policies.
- Currently, the MLA restricts the purposes for which data can be shared.
- For example, the Registrar is only able to share data with other public agencies for policy formulation or review, and not for other purposes such as improving operational processes.
- Clause 26 of the Bill introduces new provisions to align the licensed moneylending data sharing framework with the Whole-of-Government data sharing approach.
- Moving forward, the Registrar will be able to share data in accordance with and to the extent permitted by a data sharing direction given to the Registrar under the Public Sector (Governance) Act or PSGA.
- The PSGA contains the necessary safeguards to protect information that is shared. These safeguards include provisions that prevent unauthorised disclosure or improper use of the information shared, and unauthorised re-identification of anonymised information.
- The MLA also limits whom licensed moneylenders can share data with.
- For example, other than the MLCB, licensed moneylenders are currently unable to share their borrowers’ credit application and repayment information with other credit bureaux offering credit-related information.
- This has hampered comprehensive credit checks on borrowers.
- To illustrate this point, let’s consider the situation when a borrower approaches a licensed moneylender for a loan. The latter would want to check on the borrower’s credit worthiness including his credit history.
- To do so, the licensed moneylender’s only recourse now is to purchase credit reports from the MLCB, which do not provide a complete picture of a borrower’s credit history.
- The licensed moneylender is also unable to approach other non-designated credit bureaux to purchase credit reports on the borrower, as he is not allowed to disclose the borrower’s ID number.
- This may enable over-borrowing by individuals who choose to withhold or inaccurately declare their credit information.
- Hence, clause 16 introduces amendments to allow licensed moneylenders to disclose borrower information to more third parties, such as a prescribed list of credit bureaux.
- These credit bureaux will then be able to provide additional information on the borrower’s creditworthiness and indebtedness, leading to more informed and responsible lending practices.
- In addition, licensed moneylenders will be able to share borrower information with any prescribed person for purposes related to the welfare and protection of applicants, borrowers and sureties.
- Licensed moneylenders will also be allowed to share borrower information with third parties engaged to provide IT support or to recover debts. This ensures the smooth delivery of business operations.
- To safeguard information of loan applicants and borrowers, MinLaw will exercise prudence when prescribing the list of organisations that licensed moneylenders can share borrower information with, by taking into consideration whether the organisation has the necessary data protection and security measures that safeguard borrowers’ information.
- The extent of the borrower information that can be shared will be limited to what is necessary. For example, in the case of purchasing a credit report from a prescribed credit bureau, the disclosure of the identification number of the loan applicant will be necessary.
- The Bill will also enable licensed moneylenders to obtain records from public agencies to verify the accuracy of information submitted by loan applicants.
- To ensure the security and integrity of borrower information, clause 17 introduces amendments to enhance security arrangements that licensed moneylenders must undertake to safeguard information in their possession or under their control which they have obtained or received under or for the purposes of the MLA, such as preventing unauthorised access to or use of the information.
(B) Enhancing MLCB’s Functions
- Second, the Bill enhances the MLCB’s functions beyond just producing credit information reports and serving as a repository of data.
- While the MLCB was originally launched to facilitate better tracking and monitoring of unsecured loans issued by licensed moneylenders, data held by the MLCB can be better utilised to benefit both borrowers and licensed moneylenders.
- For example, the Bill will allow the MLCB to provide credit reports of loan sureties to licensed moneylenders during loan applications.
- To illustrate, consider a case where a loan applicant applies for a loan from a licensed moneylender, and where the surety has outstanding loans with other licensed moneylenders.
- Currently, the MLCB is unable to provide the surety’s credit report for the licensed moneylender to independently verify the surety’s debt obligations with other licensed moneylenders. The licensed moneylender would thus be unable to make a complete assessment of the surety’s creditworthiness.
- With this amendment, licensed moneylenders will be able to conduct more comprehensive credit checks before granting a loan, thereby helping them manage their credit risk.
- Next, clause 20 introduces a new section 74A in the MLA to allow the MLCB to produce business reports for licensed moneylenders.
- These business reports will assist licensed moneylenders in the development and improvement of their business strategies or practices, thereby raising industry standards.
- If a credit report, business report or loan information report is delivered in error, clause 23 gives the Registrar the ability to direct these recipients to dispose of these reports within a specified time frame. Failure to comply would be an offence.
(C) Facilitate Digitalisation
- Third, the Bill facilitates digitalisation in the industry.
- Clause 8 of the Bill allows licensed moneylenders to provide borrowers with statements of account through modes of communication other than mail and email.
- Licensed moneylenders can instead, for example, use their own app, website, or business WhatsApp accounts, thereby increasing business efficiency.
- As a safeguard, both the licensed moneylender and the borrower must agree in writing on these new modes of communication.
- The last area of the Bill deals with miscellaneous amendments that update and standardise provisions in the MLA.
- To prevent miscommunication between the borrower and the licensed moneylender, clause 7 mandates that the rate of interest charged be stated in any advertising or marketing material, as a percentage per annum, month, or other period that the licensed moneylender charges for offering loans.
- The Bill also makes it an offence for licensed moneylenders to demand payment from borrowers of sums other than the fees permitted or sums exceeding such fees.
- To ensure consistency in business practices, the Bill extends the deadlines for licensed moneylenders and the MLCB to notify the Registrar of certain events from 7 days to 7 business days.
- The Bill also imposes record-keeping obligations on licensed moneylenders to start keeping loan application forms and copies of supporting documents from the date the loan application form or supporting document is received. Similarly, licensed moneylenders must start keeping the note of contract from the date they issue it.
- Mdm Deputy Speaker, over the past decade, the Government’s regulatory reforms have raised industry standards and provided better protection for borrowers. The amendments proposed in this Bill seek to do the same.
- In summary, this Bill will allow data to be used in meaningful ways that are aligned with the Whole-of-Government standards, and will facilitate better business practices by licensed moneylenders.
- Mdm Deputy Speaker, I beg to move.
Last updated on 22 November 2023