Investigations on Financial Institutions for Breaching Car Loan Restrictions

Financial institutions (FIs) regulated by the Monetary Authority of Singapore (MAS) are required to ascertain the reasonableness of the stated purchase prices of motor vehicles quoted in loan applications. They have in place policies and procedures to do so. These procedures include obtaining multiple motor vehicle valuations from independent sources and comparing them against price lists published by authorised dealers.

As part of MAS' ongoing supervision, MAS monitors FIs' compliance with rules and regulations, including through onsite inspections. Since the motor financing rules were reintroduced in 2013, MAS has not had to take any regulatory actions against FIs. There is, hence, also no immediate need to tighten the regulations.

It is also in the interest of an FI to ensure that motor vehicles are appropriately valued so that loans are adequately collateralised and comply with MAS' financing rules. However, where an FI is found in breach of any of our regulations, MAS will not hesitate to take regulatory action.

Two follow-up questions, Mdm Speaker. From 26 May this year, MAS stated that the revised loan-to-value ratio and loan tenures will be extended to motor vehicle financing on a hire-purchase basis. Prior to the latest set of regulations, it was widely reported that MAS' curbs of 2013 were being breached quite blatantly in the motor industry by way of overtrade, disguised leases and various other inflationary strategies and creative measures.

Can the Acting Minister clarify if companies that advertise "private-hire purchase" schemes, the hyphenation being between "private" and "hire", or with loans which are sold as "own a car with 10% downpayment", are in breach of MAS' latest guidelines? These are available today on the market.

The second question is, has MAS considered reviewing the inclusion of motor loans in the Total Debt Servicing Ratio (TDSR) framework, in view of the loopholes that seem to govern MAS' rules on motor vehicle financing?

On the first question, I thank the Member for highlighting this. MAS is aware that for hire-purchase arrangements, there have been loans given out that are not in line with the motor vehicle financing restrictions. Therefore, the same restrictions are now applied to the hire-purchase regulations. This comes under the Ministry of Trade and Industry (MTI), who is the regulator. They will monitor these and take enforcement actions should they be breached.

If I heard the Member correctly, he mentioned about private-hire vehicles. Private-hire vehicles are businesses, so they hire vehicles to rent out or run as Uber services. They are not really caught by this policy, because it is revenue-generating. Therefore, because it is revenue-generating, it comes under a separate consideration as if you are funding a business. That is why it is not captured under this policy.

As for the third question, whether this would be part of TDSR, I believe it is. I am afraid I do not have the exact information, but I believe motor vehicle loan financing is part of the calculation in TDSR.

A final question, Mdm Speaker. I thank the Acting Minister for the reply. The issue now appears to be focused on hire-purchase agreements which are found in the market. And what has happened is that while, indeed, they are set up ostensibly for a business or commercial purpose, there is also the prospect of not running it for that purpose at all, as in, for example, you register a company or a private hire under the Uber or Grab framework but in actual fact what you are doing is you are owning a vehicle but not exactly using it for the purpose for which it is registered. That, in a way, is a loophole or a workaround the existing MAS curbs. Does MAS have any plans to address this matter?

I thank the Member for the comment. If this is, indeed, the case, I think it is in violation of the spirit of the policy. If there is specific feedback on practices like that, do let us know. Between MAS and MTI, we will look into it. I do not think it is correct for this to proceed.