A credit bureau for moneylenders in Singapore will begin operating on March 1, the Ministry of Law (MinLaw) announced on Wednesday (Feb 24).
The Moneylenders Credit Bureau (MLCB) will enable licensed moneylenders to assess the creditworthiness of borrowers, and help borrowers avoid borrowing beyond their means.
All licensed moneylenders will have to provide information of their loans to customers and their repayment records to the bureau. This information can then be accessed by both borrowers and other licensed moneylenders when evaluating a credit application.
This fixes a problem now where an individual may approach different moneylenders to take out multiple loans and moneylenders have no access to information on whether the borrower is overstretched.
Said Mr Billy Lee, founder and executive director of Blessed Grace Social Services: “The MLCB will encourage borrowers to practice greater financial prudence and borrow within their means, given that their loan information will be accessible by all licensed moneylenders.”
Borrowers can use their own credit reports to keep track of and better manage their own loans, said MinLaw.
MinLaw and the Registry of Moneylenders will also use the credit bureau to better monitor borrowing and lending activities.
The cost of each credit report is 50 cents for licensed moneylenders and $1 for borrowers.
The credit report will include information on:
(a) The loan type and tenure, total outstanding principal amount and total amount payable; and
(b) Details of all active loans the borrower has with licensed moneylenders and the repayment status of each loan.
Licensed moneylenders can use a borrower’s credit report for better credit risk assessment before granting a new loan, and deny loans to those who are borrowing beyond their means.
This in turn can help licensed moneylenders to lower the default rate and hence, their cost of doing business.
Licensed moneylenders can also use the credit reports to keep track of borrowers with active loan contracts with them, including whether the borrowers have taken up other new loans.
Said Mr Peter Tan, president of the Moneylender’s Association of Singapore: “In addition to protecting borrowers from overborrowing, the MLCB can help licensed moneylenders make better informed decisions and credit assessments. It is a positive step towards helping to mitigate the risk in our high risk industry.
The idea for a moneyleders’ credit bureau – similar to that for banks – was first mooted in 2014. Credit reference agency DP Information Group (DP Info) was appointed by MinLaw in November 2015 to design and develop the MLCB. DP Info will also manage the operations of the bureau.