The best way to find protection from loan shark harassment is not to use them in the first place. However, sadly, life is not always that simple.
Loan sharks are clever at presenting an irresistible alternative to conventional lending options. When people are under pressure, it’s easy to succumb and make the wrong choice.
Dealing with loan shark harassment
Loan sharks offer quick loans with few if any, checks. There is no payment structure, so the money is repayable on demand when the loan shark feels like it.
If the borrower cannot pay back the money, loan sharks can turn very ugly. Intimidation, threats, and violence are all part of the loan shark modus operandi.
People who are being threatened by a loan shark can seek help from organisations like Credit Counselling Singapore or just speak directly to the police.
The courts are tough on loan sharks’ behaviour in cases of physical violence, threatening behaviour towards the borrower or their family, and blackmail. Assault causing physical injuries is a crime under the Penal Code. Threats and intimidation are an offence under Section 503 of the Penal Code.
Loan sharks often resort to damaging the borrower’s property. Vandalism is an offence under the Vandalism Act. Harassment is an offence under the Protection from Harassment Act.
However, loan sharks are becoming ever more inventive and finding different ways to intimidate people who they lend money.
What is a loan shark?
Section 5 of the Singapore Moneylenders Act only allows licensed money lenders to trade. The Act also has specific categories of people who are either excluded from the legislation – such as pawnbrokers – or exempt money lenders.
A licensed money lender is defined as follows:
“Whether as principal or agent, carried on or hold himself out in any way as carrying on the business of moneylending, whether or not he carried on any other business.”
A loan shark is an unlicensed money lender who falls outside the remit of the Act. These people or organisations deliberately avoid taking due diligence which would ensure they are legally recognised.
Loan sharks are characterised by attractively fast loans with high interest rates and draconian terms if the borrower defaults on their repayments.
Loan sharks are not always obvious
One standard tactic of the loan shark is to try to appear respectable and genuine, but they often don’t provide much information about who they are compared to a mainstream licensed money lender.
A specific style of advertising
A hallmark of the loan shark is minimal identity details, so there will usually be no business address, company name, or registration number. Names are often first names only.
The adverts are short and usually only providing a first name and contact number or invite contact by SMS. The emphasis will always be on fast approval, any sum available, plus weekly, or monthly flexible repayments.
A genuine and licensed loan company will never advertise like this. It will provide as much information as possible to demonstrate their genuine credentials. Advertisements for reputable lenders will contain their registration number, full company name, and business address.
Applicants can borrow any amount of money
Loan sharks tend to offer any amount for people to borrow. Compare this with licensed money lenders operating within strict criteria and not lending beyond affordability guidelines.
Loan sharks are unscrupulous and will lend people sums they cannot hope to repay, especially with the accumulated impact of very high interest rates.
Reputable money lenders offer set amounts of money at a fixed and visible interest rate, which is usually competitive or standard for the current marketplace.
No affordability assessment
Licensed money lenders want borrowers to be able to repay the money; it’s not in their interest if a customer defaults. Because of this, they will take time to assess an applicant’s ability to repay, usually by looking at salary or wage slips and income tax statements. They will also credit reference a new customer.
Compare this with a loan shark who deliberately avoids the standard lending protocols. It’s also in their interests if a customer defaults, as they can begin charging even higher penalties.
Any customer will have a ceiling on how much they should borrow based on their income, and their ability to repay the loan. Verifying this protects the applicant and is the hallmark of a responsible and legitimate lender.
No paperwork
Loan sharks don’t generally go in for paperwork, so a borrower going down this route won’t have any idea of the terms and conditions, interest rates, plus the penalties for late or missed repayments.
This works in the loan shark’s favour as they can charge what they like, including higher interest rates and onerous penalties if a borrower defaults, all of which are added to the ever-spiralling loan debt.
Licensed lending institutions require a lot from the applicant; this is one of the things that can put some people off. Usually, they will need:
- Proof of identity, including NRIC
- Evidence of monthly income
- Proof of residency or passport if you are not a resident
- Current address
- A Contribution Statement for the Central Provident Fund (CPF)
High interest rates
Loan shark loans seem too good to be true, and that’s because there is a sting in the tail for quick approval, and no paperwork. Borrowing any amount you want will come with the imposition of extremely high interest rates.
There is no limit to the interest loan sharks can charge (supported by the absence of any contract or paperwork), and no limit to how that might spiral if the borrower makes late repayments.
In contrast, licensed money lenders can only charge a specified interest rate every month when the debtor makes late repayments. They can also impose a further S$60 per month to cover administration, but anything beyond this is illegal.
Hidden fees
The problem with hidden fees is that customers don’t know about them, and there is no documentary record.
Loan sharks charge hidden fees, usually described as ‘admin fees’, and often require payments before the loan has even been released to the borrower.
Licensed money lenders are only allowed to charge a maximum of 10% in admin fees and only once the loan has been approved.
Final thoughts
It’s easy to say avoid loan shark harassment by not using them to borrow money, but life isn’t always that simple.
Prevention is better than cure, so it’s best to find impartial and proactive debt advice sooner rather than later instead of trying to solve a financial problem using the services of a loan shark.
However, for those threatened or intimidated by loan sharks, it’s essential to report this to the police as their actions are illegal. People harassed by a loan shark will not be held criminally liable; they are the victims.
Other agencies and organisations can also help to manage the existing debt problem, which led to the loan in the first place.
Frequently asked questions
Why would anyone use a loan shark?
It’s certainly not for their attractive interest rates and repayment terms! People are mainly tempted to go to loan sharks because of the lack of red tape, which may be problematic if they approach conventional lending institutions, and the fact they can borrow what they like.
Loan sharks are not interested in credit scores, employment records, or pay slips. People who don’t have regular, sustainable income they can evidence will be turned down by standard lenders, or it can take too long to process the loan.
Where is the best place to look for a reputable licensed money lender?
Most reputable and licensed moneylenders will have a website and often advertise regularly in different locations, like outside a building or in public areas.
Business or consumer directories are another good source, and some money lenders will use social media platforms, but potential borrowers should always double-check these carefully.
Is there a limit on how much someone can borrow?
Licensed money lenders must operate within strict limits. They can only lend a figure based on an applicant’s annual income and residency status.
Specific income/loan ratios are set out on the Singapore Ministry of Law website. For instance, if you are a Singaporean citizen or permanent resident (PR) with an annual income of S$10,000 or below, you can only borrow a maximum of S$3,000.
Is it a criminal offence to borrow money from a loan shark?
It’s not a crime to use the services of a loan shark, although it is unwise, and the loan shark is unlicensed, so it is operating illegally. Loan sharks who threaten, intimidate, or harass people are committing crimes, so this should be reported to the police.
