“Senior Parliamentary Secretary for Education and Law Sim Ann, who announced this yesterday, said the new measures are aimed at tightening the regulation of licensed moneylenders and safeguarding the interests of borrowers” (New Ad Rules For Moneylenders, Miss Sophie Hong).
New measures introduced to force licensed moneylenders to be more responsible with their publicity and advertisement efforts – in the news report “New Ad Rules For Moneylenders” (October 14, 2011) by Miss Sophie Hong – are moves in the right direction. In general, the rolling out of tighter regulations and stricter enforcement activities will prevent moneylenders – especially newer, more aggressive ones – from toeing the legal line, increase healthy competition between licensed moneylenders, and correspondingly eliminate irresponsible or incompetent operators.
In particular, the new stipulation that advertisements “must not have misrepresentation, omissions of material fact, and information which cannot be verified” would go a long way in preventing moneylenders from exaggerating the convenience and timeliness of processing loans, or expound upon the purported “negligible” costs of borrowing. Borrowers would no longer be plagued by the perils of information asymmetry, and gradually become more judicious with their decisions before loans.
Educating Borrowers And Tackling Root Causes
Nevertheless, the slew of policy reforms – while preventative in nature – may prove to be unsustainable in the long-term, as it deals with one-side of the borrowing-lending problem. While lucrative interest rates and considerably-lax laws have induced more individuals to register as moneylenders, the rise of gambling-related activities in Singapore has also fuelled the current trend. This includes the construction of the casinos, the growth of online betting, risky endeavours on the stock market et cetera. The administration should be cognisant of these developments, and design appropriate strategies – in terms of awareness campaigns and counselling – to curb the expansions.
Furthermore, the demands of capitalism and convenience of globalisation have also fuelled pragmatic or materialistic demands within our society. This is especially true amongst some young professionals, who tend to adopt laissez-faire attitudes towards money-lending so as to sustain their extravagant spending habits. This cultural progression can also be addressed with proper education of the respective borrowers, helping them to comprehend the ramifications of poor finance-risk management.
While it is probable that the new restrictions might encourage borrowers to seek illegal sources such as loan sharks, the realistic solution then lies with tackling the aforementioned root causes, and empowering to-be borrowers to make intelligent decisions before committing themselves to loans. Aspects of fiscal know-how – such as how to track debt, control expenditure and chart personal finances responsibly – can be shared through public information seminars, or presented through info-graphics on the Internet.
Prevention is better than cure; if policies are not substantially put in place to curb transgressions from lenders and borrowers, complications might manifest and cause the money-lending scene to spiral horribly out of control.
A version of this article was published in My Paper.