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Clampdown by the authorities comes amid rising concern over how these lenders operate
By Mavis Toh
George Phua Chye Hee, founder of Capital Alliance Credit, allegedly:
Gave false information to the Registry of Moneylenders Handed out loans without proper documentation Lent excessively to low-income earners Failed to inform borrowers in writing about the terms of their loans Made contracts in which the interest rates were not clearly stated
-- PHOTO: ISTOCKPHOTO
A LICENSED moneylender yesterday became the first to be hauled to court under rules designed to stamp out abuses in the industry.
Singaporean George Phua Chye Hee, the founder of Capital Alliance Credit, faces about 90 charges, including giving false information to the Registry of Moneylenders (ROM) and failing to properly inform borrowers of the terms of loan.
A licensed moneylender yesterday became the first to be hauled to court under rules designed to stamp out abuses in the industry.
Singaporean George Phua Chye Hee, the founder of Capital Alliance Credit, faces about 90 charges, including giving false information to the Registry of Moneylenders (ROM) and failing to properly inform borrowers of the terms of loan.
The case comes as the authorities clamp down on licensed moneylenders with suspect business practices, amid growing concern over how some lenders have been operating.
Black sheep in the industry have been in the news for charging exorbitant interest rates similar to those of loan sharks, not explaining loan terms clearly to borrowers, and for unprofessional service.
Last year, eight licences were revoked and four not renewed, because the holders had breached the Moneylenders Act or rules.
The Act was amended in November 2008 to give borrowers additional safeguards, while allowing moneylenders to grow their operations.
But this is the first time a moneylender has been charged with contravening it.
Phua is said to have handed out loans without proper documentation and lent excessively to people on low incomes, court documents show.
For example, he allegedly gave a borrower earning less than $20,000 a year an unsecured $4,400 loan. Under the law, loans to low-income earners are capped at $3,000.
He is also accused of failing to inform borrowers in writing about the terms of their loans and making contracts in which the interest rates were not clearly stated.
In one case, he is said to have made a contract with a borrower for a $6,500 loan at 1.5 per cent-a-month interest, when the actual loan was $5,000 at a monthly rate of 10 per cent.
The 41-year-old also allegedly lied to the ROM and provided it with false information in his quarterly statements.
The prosecution will be proceeding with 30 charges, and taking the rest into consideration.
His licence was granted in May 2009 but the registry decided not to renew it a year later amid concerns over his firm’s operations.
It is believed that the ROM launched an investigation into Phua’s firm after receiving complaints about it.
Licensed moneylenders contacted yesterday said they were surprised at the tough stance the ROM is taking.
Mr David Poh, president of the Moneylenders’ Association of Singapore, said: “It shows that the registry is going all out to tell moneylenders they can’t abuse their licences any more.”
Mr Alvin Sie, the association’s coordinating officer, said the court case will “wake up” errant moneylenders who are failing to make sure borrowers understand the terms of loans.
Another moneylender, who declined to be named, said he will now be extra careful to make sure borrowers are aware of what they are signing up for, to avoid the risk of complaints.
When the Act was amended in 2008, the moneylending industry was also modernised to allow licensed lenders to set up branches and to advertise more freely.
The industry grew from 169 operators in 2007 to the current 267. But the lenders also attracted plenty of criticism.
Last year, the ROM received 64 complaints against them, up from 18 in 2009.
The complaints included failing to explain the terms of loans to borrowers and not issuing receipts for cash payments.
Licensed moneylenders are required by law to tell borrowers upfront the terms and conditions of loans, and a written contact must be drawn up in a language that the borrower understands.
To raise professionalism, applicants for a licence or anyone responsible for the management of the business must now also pass a written test on the Moneylenders Act and its rules.
Mr Poh said: “Moneylenders must be more professional and aware of the harsh consequences that could be against them if they do not conduct their businesses properly.”
George Phua Chye Hee, founder of Capital Alliance Credit, allegedly gave false information to the Registry of Moneylenders, handed out loans without proper documentation, lent excessively to low-income earners, failed to inform borrowers in writing about the terms of their loans, and made contracts in which the interest rates were not clearly stated.
