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Debt Collection in Singapore: Do’s and Dont’s 2023

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Despite having regulations meant to protect borrowers, the police are still receiving a high amount of reports against debt collection agencies. An average of 367 reports were reported from 2018 to 2021.

These figures highlight the need for stronger measures to ensure fairness and safety when dealing with debts. This year on September 13, the Debt Collection Bill was passed in Parliament. Under the Bill, debt collectors need to apply for a license and be subject to regulation. 

Until the proposed law is passed, it’s important to know the laws against illegal debt collection businesses. Stay informed so that you can keep your financial security safe!

Read Also: Debt-Free End Year and Debt Consolidation Plan Singapore

Debt Collection Process

A debt collection business may conduct debt collection for a specific lender. Lenders hire their services to avoid losing huge amounts of money by collecting debt from non-playing clients. 

Here’s how collectors recover debts:

  1. The creditor will send a demand letter to the debtor to pay the required amount, including interest for late payments. 
  2. The creditor will file a writ of summons in court. 
  3. The court will serve the summon paper to the debtor.
  4. The debtor will be entitled to 8-14 days to file a defense. 
  5. The court will examine the case and decide after receiving both parties’ defenses.

Is Debt Collection Legal in Singapore?

Debt collection is a legitimate economic activity in Singapore and is crucial to facilitate the money lending business. 

Debt collectors follow a code of conduct imposed by the Credit Collection Association of Singapore (CCAS). Yet, while they follow a code of conduct, their actions are not bound by existing law.

Licensed debt collection agencies must adhere to MinLaw’s rules, including licensed moneylenders, banks, and other financial institutions. But loan sharks, as they operate illegally, also practice debt collection activities differently.

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Debt Collection Bill 

Due to the increasing police reports against collection agencies and their illegal practices over the past, there is a current proposal from the Ministry of Home Affairs (MHA) to upstream regulations. One recommendation is to limit the debt collection activity to the act of collecting or trying to collect only. The activity will not include serving letters of demand or any legal process.

Other proposals include:

  • Acquiring a police license to run a debt collection agency
  • Verifying the identity of the debtor before collecting debt
  • Displaying debt notices only on the debtor’s property

Legal Conduct By Debt Collection Companies

The Ministry of Law requires all debt collectors and other debt collection agencies to follow a strict code of conduct. Any report of deviation from their debt collection services can result in suspension or immediate termination of their business with the possibility of an industry ban.

A debt collection agency can:

1. Arrange a Private Meeting with you

As a debtor, this may sound scary and intimidating. Still, arranging a private meeting to speak to you about your debts does not violate any legal laws in Singapore. 

Typically, the debt collector will discuss and negotiate alternative payment terms as part of their debt recovery plans. They may also speak to you legal and financial consequences of not paying your debts.

2. Talk to Family and Friends

Conversing with your family, friends, and colleagues is a standard procedure for most Singapore debt collection processes. Debt collection agencies often follow this routine to learn more about your whereabouts, especially when they cannot reach you through communication.

3. Mediate and Negotiate Repayment Plans

One of the most necessary tasks your Singapore collection agency can do by law is to communicate, resolve issues, and negotiate payment plans. However, they will ask a third-party agency to help you with your debt.

In most cases, these third-party agencies will negotiate with your lenders and help you create an installment plan that you can pay at a regular maximum of 10 years. However, borrowers have no guarantee they can pay all the money they owe with more than one payment — especially if the debt collectors find the borrower’s case involves a challenging debt amount.

What Do Debt Collectors Cannot Do in Singapore?

Borrowers have protection against debt collectors, thanks to Singapore’s protection laws. If they do just one illegal or violent action against you or anyone connected with you, you can call the police and other authorities.

Debt collectors have no right to vilify borrowers or act in contempt to extract money the latter owes to them. Below are actions that debt collectors cannot enact against their borrowers despite how much money they owe.

1. Physical Harassment

Debt collectors who inflict physical damage — even a minor scratch at any part of a borrower’s body — have exhibited undesirable conduct for the Ministry of Law. By Singapore’s laws, it is an act of unwarranted contempt and possible physical assault.

2. Intimidation, Threats, and Verbal/Psychological Harassment

Singapore’s Ah Longs often work with illicit debt collectors and use intimidation tactics to scare borrowers into paying the money they owe. In some cases, illicit debt collectors can send written notes telling them of undesirable consequences if they fail to pay their financing. 

A debt collector can not force you to comply with their demands. Any form of physical or mental intimidation, distress, or threat, such as scaring you to comply with their demands, is illegal and should be reported to the police.

3. Vandalism of Borrower’s Property

Singapore borrowers have all their rights reserved against unscrupulous collection agencies who will visually tarnish or damage any aspect of their property. In the past, illicit Ah Longs working with illegal debt collectors resorted to property harassment, such as broken stalls or graffiti-marked doors or shutters.

Vandalism is a crime in Singapore, and law enforcement will immediately capture and detain any individual caught performing them. 

4. Unlawful Stalking

Any Singaporean will feel unsafe when it involves someone following them without their consent. In the past, illicit debt collectors have resorted to this illegal activity of following and investigating borrowers who have failed to pay their loans on time. In the country, an individual’s privacy is essential, and invading someone’s privacy is against the law.

If you spot individuals following you when you fail to repay your lender, report them to local authorities as soon as possible. Furthermore, have law enforcement investigate your lender for any involvement regarding unlawful stalking.

5. Group Harassment

Unlawful assembly isn’t limited to protesting on the streets without a permit. It’s also the illicit organization of a group with a single violent motive. Loan sharks have used illegal debt collectors who resort to humiliation and physical and verbal violence while cornering a borrower with their vast numbers.

Other things Debt Collectors can’t do Include:

1. Asking any Third Party to Pay Money and Resolve the Debt on your Behalf

Unless one of your family members is a co-payer of your loan, the collection agency cannot ask someone else to pay for your financing.

2. Taking your Belongings 

Debt collectors cannot take your belongings to compensate for your debt. This action is a criminal offense in Singapore and should also be reported to the police.

3. Contacting you During Unreasonable Hours

Debt collectors should follow the rules for contacting debtors. Even though you have unpaid debts, you are entitled to basic respect from these debt collectors.

Thus, it is only proper that they should not call you at work and unreasonable hours, which can be defined as beyond 9 p.m. to the wee hours when one is supposedly resting.

Anyone who has undergone this form of harassment from a group of individuals can file a formal case. Additionally, they can negotiate with their lenders. If their lender fails to comply, the Ministry of Law will deem them illicit lenders, which allows the government to issue criminal charges against them. 

Steps Debtors Can Take When Dealing With Illegal Debt Collector Conduct

If debt collectors have mistreated you or anyone you know through any situation we listed above, you can do a few things to stop it from happening repeatedly.

1. Call Law Enforcement

The local police have a dedicated hotline for any form of violence or verbal harassment. You can dial 999 on the phone to call law enforcement and allow them to investigate the matter thoroughly.

2. Protection Order Against Unscrupulous Lenders

For minor counts of harassment, illegal lenders must register their businesses, which ensures they comply with the Ministry of Law’s rules and requirements for lenders. Significant criminal charges will force collection agencies and lenders to shut down their operations.

With or without evidence of major or minor harassment, Singaporeans can file a protection order against erring or harassing collectors. This order guarantees they cannot physically approach and verbally or digitally communicate with the borrower except through a lawyer or government arbitration.

3. File a Formal Complaint to the Credit Collection Association of Singapore (CCAS)

Legitimate collectors follow a strict code of conduct that the CCAS oversees and implements with all its members. If one of their members fails to follow these requirements or achieve the high standards they impose, they’re liable for license review and possible suspension or termination.

You can file a complaint against any collector. Ensure you have proof of conversations and events that happened through any form of written and recorded interactions and contracts. In doing so, the CCAS can help you resolve problems with your collector fairly.

How Long can you Legally be Chased for Debt in Singapore?

There is a statute of limitations on collection. In Singapore, the “expiration” of debt is six years. After six years of no contact, a debt can no longer be legally collected.

Avoid All These Hassles By Borrowing Money From Legal Moneylenders

Legitimate moneylenders apply for a license to lend money from the Ministry of Law. You can find all of them in the Registry of Licensed Moneylenders on MinLaw’s website.

  • Debt collectors are legal in Singapore. Debt collectors will soon have to apply for licenses to regulate and better manage their activities. 
  • Debt collectors can talk to your family and friends, arrange a meeting, and negotiate loan repayment plans.
  • If the debtor doesn’t pay up, most collectors enforce an order to seize or sell the borrower’s property.

Taking out a loan can be the saving grace for your finances; however, it also comes with big financial obligations. Before you borrow money, ensure you understand how much and when you need to pay back—and ensure that doing so will fit comfortably within your budget. 

If you need a loan, Loan Advisor can help you filter and find the right loan for your needs. Request loan quotes now for free! No obligation to apply is required.

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