News

New Laws Proposed After Complaints about Debt Collectors’ Actions

2022-06-16 , 2:23 pm

Apparently, laws restricting or outlining debt collectors’ actions don’t exist yet, but better late than never, right?

The fundamental thing that needs to be addressed, which also underlies the new and proposed laws is that money lending is legal—all financial institutions give out loans all the time—but that doesn’t mean that some debt collectors don’t use underhanded and violent means to get the borrowed sum back.

It’s nothing like splashing animal blood, spray paint, pig heads on a spike, stalking, and chasing down alleyways anymore these days.

Some debt collectors get creative, like sending a hoard of food delivery riders to the debtors’ doorsteps, thus creating an embarrassing scene for the debtor as colourful uniforms congregate outside their house.

There are also hoses involved, and many other… interesting tactics, which you can easily find if you dig down that particular rabbit hole deep enough.

Hence, proposing laws to regulate the debt collectors’ action is all about harm reduction.

For instance, cigarettes.

The government disdains the product but legalises it, while putting high tariffs, legal age restriction, and disallowing smoking in most public spaces. It doesn’t stop nicotine addicts from getting their fix, but it minimises the damage to public welfare at least.

High Number of Police Reports about Nuisances Caused

Lately, there has been an increasing number of police reports regarding the alarm and inconvenience that the debt collectors’ actions have indirectly caused to the members of the public.

In a statement released by the Ministry of Home Affairs on Wednesday (15 June), there were 272 police reports on debt collection harassment in 2021, which doubles the statistics from 2015, where there were 134 reports.

In 2018, there was a peak of 590 police reports regarding debt collection activities.

That must have been a busy year for loan sharks, jeez.

Since there are no existing regulations or laws around debt collection activities, MHA thought it was pertinent to start a public consultation on what the proposed rules should be.

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Defining Debt Collection Activity

In the draft of the proposed legislation, it defines debt collection activity as “any activity undertaken to collect or attempt to collect any debt, but excludes the serving or attempting to serve any legal process or letter of demand on any person in connection with the enforcement of any debt”.

This will apply to the collection of debt owed to one’s company and the collection of debt owed to others, whether it be a person or company.

Under this regulation, both physical and non-physical activities, such as visits to a debtor’s workplace or residence and making phone calls to debtors, can be considered as debt collection activities.

Seems fair enough, but you might want to add “no robocalls” to that list, because any tech-savvy debt collector can set up that annoying system of making calls every five minutes… Or less.

The MHA stated that the definition is “scoped broadly” to stop errant debt collectors from trying to find loopholes in the regulations.

Class Licensing

One of the proposals given is to introduce a licensing and approving regime for debt collection companies and their staff.

The MHA believes that it is important to make distinctions and differentiate companies whom the debtors owe the money to, and companies that are specifically hired or established to harass or attempt to bulldoze their way into collecting the debt.

The Ministry has noted that it is the latter category that account for the majority of the problematic debt collection conduct, which is why they will be subjected to the tightest requirements.

The aforesaid requirements include a screening process by the police, which is “similar to the application process for many other regulatory regimes”.

However, the proposed rules won’t apply to law practice entities and insolvency practitioners—since they are already under their own set of regulations—or collections conducted by or on behalf of the Government, and court-ordered debt collection activities.

After all, debt collection is a legitimate activity which “facilitates the fulfilment of financial obligations”.

In light of increasing concerns among members of the public, MHA has decided that it is better to implement regulatory interventions on the industry, to better manage, and hopefully prevent, dismantles in the course of collecting the debts.

So, how will the class licensing work?

For one, MHA proposes that companies that conduct debt collections extensively to recover the debts owed to them should be classified and licensed, but they must have primary commercial interests that are not debt collections first.

These types of businesses will eventually be specified in the legislation, and it will include businesses conducted by licensed moneylenders, banks, merchant banks, or finance companies.

Companies that fall under this class license won’t have to apply for licensing or approval, but that doesn’t exempt them from the established debt collection rules.

Debt Collection Rules

Frankly, this is the most important and easiest part.

Among other things, a debt collector must not:

Display or use any physically threatening words, behaviour, writing, sign or visible representation.
Post or display any notices about a debt on a property, car or workplace that does not belong to the debtor, or at any public place.
Continue any attempt to collect money or communicate with a person who has verifiable means to show that the debt is in dispute and the debtor wishes to settle the debt through other legal means, such as through court or mediation.

Of course, there are more rules in place than these three points.

The proposed legislation, which doesn’t spell out the potential penalties for flouting them yet, can be found at https://go.gov.sg/mha-consultation-paper-debt-collection-regulations if you are interested in the full details.

Members of the public can share their opinions on the proposal from 15 June to 29 June at this link.