Despite high rates, borrowers have few alternatives
An annual interest rate of 240 per cent for a loan may sound high, but debt counsellors say they have seen worse .
Credit Counselling Singapore (CCS) general manager Tan Huey Min has even seen cases where borrowers were charged annual interest rates of 1,000 per cent.
Despite such high rates, people still signed off on such contracts because they had few alternatives.
Ms Tan says: "They can't take personal loans from banks because they need to have a certain level of income to do so.
"And they may not have the option of borrowing from co-operatives as they are open only to a certain segment of the public."
The changes in the Moneylenders Act last year has helped reduce the number of borrowers facing issues, albeit slightly.
From January to October this year, CCS has counselled 3,219 cases, compared to 3,760, over the same period last year.
Ms Tan says: "Gambling debts are often the main reason, but there are also those who borrow due to medical emergencies.
"We are also noticing a number of borrowers who used to be high-income earners, but did not want to change their spending habits and lifestyles when they lost their jobs."
There are 160 licensed moneylenders operating today, according to the Law Ministry website.
While banks have to abide to strict rules and licensed moneylenders have the Moneylenders Act to stick to, Ms Tan says moneylenders can be difficult to negotiate with as each has "its own way of doing things".
Mr Billy Lee, founder and executive director of Blessed Grace Social Services, estimates that one in 10 moneylenders is a bad apple.
He deems them unethical when they give out a loan even though they know the person may not be able to repay it.
In March, the new Moneylenders Credit Bureau (MLCB) gave moneylenders the ability to see other loans that customers have taken before and their repayment records.
But Mr Lee says some moneylenders still provide loans to these chain borrowers "based on their own rules".
Some of these firms also have a history of harassing borrowers and reject repayment plans that his social workers come up with, he adds.
Mr Lee says he will usually try to negotiate with the moneylender, but when he realises that the moneylender is out to keep the borrower on a contract that he knows will never be repaid, he will report the moneylender to the authorities.
He even keeps a blacklist of errant moneylenders who repeatedly deny requests for negotiations and frequently reject repayment plans from the social workers.