No matter how hard we try to save up for a big purchase, we’ll often eventually borrow money to pay it off. Whatever the purpose, be it for a startup company or a new car, you may feel tempted or forced by financial difficulties to approach unlicensed moneylenders or loan sharks offering to lend money at too-good-to-be-true terms. More often than not when you do so, you’ll probably experience harassment from the loan shark, especially if you can’t pay off the loan in time. But why do many people still fall victim to them? When there aren’t too many options available, and we find ourselves in financially difficult times, the allure of lending from loan sharks becomes all the more tempting. But we’re here to help. If you’ve unknowingly borrowed money from a loan shark and find yourself in hot water, legal remedies are available. This guide discusses loan shark harassment and what you can do to protect yourself.
1. What Are Loan Sharks?Unlicensed moneylenders or loan sharks are not registered under the Singapore Ministry of Law’s Registry of Moneylenders. This means they are lending money illegally, and anyone who deals with them can also be potentially liable for criminal offences.
2. Difference Between Licensed And Unlicensed Money LendersAccording to the Moneylenders Act — which regulates all activities related to money lending — a licensed money lender is someone who can legally lend money through a licence. Licensed money lenders can also be excluded or exempt lenders under the law. A pawnbroker is an example of an excluded moneylender licensed under the Pawnbrokers Act. Meanwhile, exempt money lenders have been exempted from the law, as per the Singapore Government’s discretion. Those without a licence or who do not fall under such definitions may be loan sharks. You do not want to deal with or engage with them at all costs, no matter how hard they try to appeal to your emotions.
3. What Are Some Signs You’re Dealing With Loan Sharks?The Singapore Police Force continually cracks down on illegal money-lending activities in the city. In June 2022 alone, they charged 36 people for their involvement in illegal lending. Many of them were captured in different locations around Singapore, such as Bukit Batok, Bishan, and Tampines. Meanwhile, almost 200 people are still under police investigation for offering loan shark assistance by conducting ATM money transfers. Fortunately, spotting a loan shark isn’t as difficult as it seems. They operate very specifically in apparent means. Here are some tell-tale signs of a loan shark so you won’t have to borrow money from any of these people:
They Provide Very Limited Details of Their Identities In Their Ads Through Flyers, Email, And SMSYou’ll know you’re dealing with a licensed money lender if you discover their services through the following ways and yet cannot find much if any information of their company name, registered business address or money lending licence number:
- Business or consumer directories, either print or online
- Websites which belong to the licensed money lender
- Advertisements plastered within or outside the approved establishment. For example, a licensed money lender may place their ad on a glass door or inside their building.
They Will Offer Any Loan AmountIf you take out a loan from licensed creditors, you will usually be offered a specific loan amount, which you will need to pay off through monthly repayments. As proof of your (the debtor’s) capacity to pay off the loan, the creditor will secure documents such as income tax returns, payslips, etc. On the other hand, loan sharks won’t usually ask for these documents from you. Instead, they will offer to lend any amount, no matter how high the value is. There is no limit to how much you can borrow, which strictly defies the limits outlined by the Ministry of Law. For example, if you’re a Singapore citizen or PR (Permanent Resident) earning an annual income below $10,000, you can only borrow $3000. If you’re a foreigner, you’re only entitled to $500. Meanwhile, a loan shark or an ah long won’t care about your monthly income. They will likely target low-income earners who obviously won’t be financially capable of paying off what they’ve borrowed.
They Will Charge You Sky High-Interest RatesLoan offers from loan sharks will always be too good to be true. However, it comes with a caveat. They can demand the money anytime they want and charge variable interest rates, leaving their victims in financial ruin. Licensed moneylenders can only legally charge 4% for any late loan repayments. They may also charge late fees of $60, but anything beyond this value is already illegal. Additionally, reputable moneylenders can’t charge you for a payment that isn’t yet due. If you spot any of these red flags, it’s best to assume you’re engaging with a loan shark.
They Didn’t Let You Sign A Loan ContractReputable creditors will get as much information as possible before they offer you a loan amount. All interest rates and loan terms will be principally outlined in the loan contract. The contract also outlines information about the debtor, such as:
- Personal information
- Place of residence
- Monthly income