Cases of Foreign Domestic Workers Borrowing and Defaulting on Loans from Licensed and Unlicensed Moneylenders

Mr Darryl David asked the Minister for Manpower (a) over the past three years, how many domestic helpers have taken loans from unlicensed moneylenders; (b) what are the consequences for such domestic helpers; and (c) what recourse do the employers of these domestic helpers have should they be harassed by the unlicensed moneylenders.

Mr Sitoh Yih Pin asked the Minister for Law (a) what is the number of foreign domestic workers who have procured loans from licensed moneylenders in 2017 and 2018; (b) what are the liabilities for employers of foreign domestic workers who default on repayment of such loans; and (c) whether the Ministry has any plans to place any restrictions on foreign domestic workers procuring such loans.

Mr Deputy Speaker, Mr Darryl David and Mr Sitoh Yih Pin asked about the consequences for foreign domestic workers (FDWs) and employers, and the recourse for employers when FDWs borrow from licensed and unlicensed moneylenders. I will address these questions together.

Where licensed moneylending is concerned, FDWs who do not repay their loans may be subject to civil action by licensed moneylenders, as with any other borrowers. Employers of FDWs are not liable to repay any of their FDWs' loans. It is an offence for licensed moneylenders to harass the FDWs or their employers for repayment or employ an agent to do so. FDW employers who are harassed should report to the Police.

We do not condone any borrowing from unlicensed moneylenders by foreign workers. To send a clear signal of our strong stand, the Ministry of Manpower (MOM) had earlier announced that if a work pass holder is found to have borrowed from unlicensed moneylenders, the employer will be informed and the employee's work pass revoked. The foreign worker will then be repatriated and debarred from further employment in Singapore.

The rule against borrowing from unlicensed moneylenders will be implemented in 2019, following a period of education and communication with work pass holders and their employers. We will intensify efforts to help them learn about money management and the risks of borrowing from moneylenders.

Any person who is harassed by unlicensed moneylenders should report such activities to the Police. From 2008 to September 2018, the Police registered about 460 reports of harassment by unlicensed moneylenders arising from FDWs borrowing or acting as guarantors. The Police and Attorney-General’s Chambers have prosecuted errant debt collectors who have violated the law and will continue to take strong enforcement action against such conduct.

Mr Darryl David and Mr Sitoh Yih Pin asked for statistics on FDWs who have taken loans from licensed and unlicensed moneylenders. Mr David and Mr Sitoh also asked if the Ministry of Law (MinLaw) intends to place any restrictions on FDWs taking such loans. Let me deal with both questions together.

The number of FDWs who took loans from licensed moneylenders was approximately 1,500 in 2016, 12,000 in 2017 and 28,000 in the first half of 2018.

Moneylending regulations do not formally define a "loan default". However, estimates based on Moneylenders Credit Bureau (MLCB) data from 2016 to the first half of 2018 show that the majority of FDWs have repaid their loans from licensed moneylenders.

The Police have also observed more foreigners residing in Singapore, including FDWs, borrowing from unlicensed moneylenders.

There are currently several measures to protect all individuals who borrow from licensed moneylenders. For example, the Moneylenders Rules permit a licensed moneylender to charge only the following for each loan:

(a) an upfront administrative fee of up to 10%;

(b) interest of up to 4% per month;

(c) late interest of up to 4% per month; and

(d) late fees of up to $60 per month.

The Registrar of Moneylenders had issued Directions to regulate moneylenders' activities. In particular, moneylenders are prohibited from advertising their loans to members of the public via mobile text messages or emails. Moneylenders are also prohibited from conducting abusive practices, such as repeatedly "rolling over" existing loans to charge the administrative fee multiple times even though no new credit is issued; or offering split loans so that late fees can be charged multiple times, per loan, each month.

In view of the recent increase in foreigners borrowing from moneylenders, on 4 October 2018, MinLaw announced two measures to strengthen protections for FDWs and other foreigners residing in Singapore from the effects of over-borrowing.

First, the Ministry will impose aggregate loan caps to limit the total amount that any foreigner residing in Singapore can borrow from licensed moneylenders. The caps were first announced for Singapore Citizens and Permanent Residents under the Moneylenders (Amendment) Bill in January this year, and the caps are:

(a) individuals earning up to $20,000 a year may borrow up to $3,000; and

(b) individuals earning $20,000 or more a year may borrow up to six times of their monthly income.

Both caps will be extended to all foreigners residing in Singapore. In addition, there will also be a lower cap of $1,500 for all foreigners residing in Singapore who earn less than $10,000 annually.

Second, the Ministry will also introduce a self-exclusion framework for all individuals who borrow from licensed moneylenders. Both Singapore residents and foreigners may apply for self-exclusion. Licensed moneylenders will be prohibited from lending to self-excluded individuals.

This framework will help individuals to control their borrowing habits and to participate in debt assistance schemes administered by voluntary welfare organisations which typically also require self-exclusion.

MinLaw, together with MOM and the Singapore Police Force, will continue to monitor the situation following the implementation of these measures and will assess if more stringent measures are necessary.

Mr Deputy Speaker, I thank the Senior Minister of State and the Senior Parliamentary Secretary for their replies. Two supplementary questions to ask. It is heartening to hear that there are measures that are being taken with regard to self-exclusion and the caps. This is pertaining to licensed moneylenders. Would it be useful for the Government to consider, perhaps in light of the fact that the employers are usually the ones who have to suffer the consequences should FDWs default on their licensed moneylending loans, to have a practice where the employer's consent needs to be sought before FDWs approach licensed moneylenders for loans? So, in a way, if you look at the self-exclusion for the casinos, for example, I understand that family members can also choose to exclude certain family members. That is the practice. So, my question is, can the authorities consider with the case of licensed moneylenders, for the employer's consent to be sought before the FDW makes that loan with the licensed moneylender?

The second supplementary question is relating to the issue of unlicensed moneylenders. As far as I understand it right now, it is not an offence to take a loan from an unlicensed moneylender. Am I correct, Senior Minister of State?

That is correct from a borrower's perspective. It is not legal for a moneylender to carry out a business without a licence.

I thank the Senior Minister of State. With that clarification, Mr Deputy Speaker, what usually happens then is that perhaps if the FDW makes that loan and she then has her employment terminated by the employer – understandably, when the employer finds out – she returns. As she has committed no crime, the FDW is technically able to return to the country again and perhaps, this entire cycle is repeated by which the FDW then perpetuates further inconvenience and stress on her new employer. Would the authorities consider perhaps in such cases some measure – I understand the concept of innocent until proven guilty – whereby such FDWs are either placed on a watchlist or even barred from returning until this matter can be clarified, to avoid further inconveniences down the road?

MOM is answering. I want to thank Mr Darryl David for the supplementary questions. Let me assure Mr David and Members that while the number of FDWs borrowing from licensed moneylenders has increased, the majority of them repaid their loans and the default rate remains low. His first supplementary question is that if the FDW goes to a licensed moneylender, whether the moneylender can seek the consent of the employer. We have considered that – the pros and the cons. At present, MOM has not made it mandatory for the FDW to seek consent or for the moneylender to do so. We have also not made it mandatory for the FDWs to disclose their borrowings from licensed moneylenders to their employers, simply because if and when we do so, it may well trigger the FDWs towards taking more drastic actions, such as gravitating towards borrowing from the unlicensed moneylenders, just so as to avoid telling the employers. So, it is a very delicate balance.

The second question on if the FDW goes to unlicensed moneylenders and the employer sends her back, whether we can put her on a watchlist. This is where MOM has said that in support of MinLaw's new measures, we will deter FDWs from borrowing from unlicensed moneylenders. Come next year, we will effect the debarment measure after a period of education and communication with FDWs and also with employers as well as other stakeholders who could be affected. We will announce the effective date at a later time.

When the debarment measure comes into effect, what will happen is, the debarment period set is based on the facts of the case. Allow me to also add that MOM will step up our education efforts to the new FDWs through our settling in programme to share with them the importance of money management and also the risks and implications of borrowing, over-borrowing and borrowing from moneylenders, in particular, unlicensed moneylenders.

Here, we would like to appeal to all employers of FDWs to also share the importance of money management and the risks and implications of borrowing.

Mr Deputy Speaker, can I just ask the Senior Parliamentary Secretary whether MOM is studying why the FDWs are borrowing money during their employment in Singapore? What are the main reasons? If we are not studying it, can I ask whether MOM is willing to conduct this study so that we understand what the root of the problem is, and then we can really address it?

I want to thank Member Mr Louis Ng for his question. Yes, we have been looking into all the possible reasons. Anecdotal evidence tells us that, in certain cases, FDWs borrow from the licensed moneylenders to tide through certain requests from home, such as unforeseen medical bills, college fees for their children and so on. They need to borrow this amount of money for a month before they receive their next pay cheque from the employers. We are thinking through and we will certainly consider mounting a study to understand this a little more.

I would like to highlight that there are a lot of unlicensed moneylenders that pass off as licensed moneylenders. And not to mention FDWs, but even my residents would receive short message service (SMS) from unlicensed moneylenders and they just go ahead to borrow money from them. These turn out to be unlicensed. The measure of sending the FDWs back seems very drastic because the FDW may not know. Can we exercise some flexibility so that, with the consent of the employer, they can actually continue to stay in Singapore?

Two parts to the question. First, we will intensify the education efforts to help FDW understand who are the licensed vis-à-vis the unlicensed moneylenders. For employers who wish to continue hiring their FDWs who are debarred for various reasons – maybe because they are pending the arrival of a new FDW – they can certainly put in a request to MOM, and we will look at it on a case-by-case basis.