SINGAPORE — A police license may be required to run a debt collection agency in Singapore, one of several rules under proposed new laws to regulate their business.
Collection agents will also be required to first verify that the person they are collecting the debt from is the debtor, under proposed rules released by the Home Office (MHA) on Wednesday June 15.
Additionally, they will not be permitted to behave in a physically threatening manner. This includes speech, writing, signs or any visible representation, MHA said.
The ministry’s recommendations aim to address the problem of the high number of police reports against debt collection companies and their staff for alarming and inconveniencing members of the public.
There were 134 such reports in 2015, which rose to 590 in 2018, before dropping to 272 reports last year.
Currently, there are no regulations that specifically address what debt collectors can or cannot do.
MHA proposes to define debt collection activity as any action taken to collect or attempt to collect a debt, but excludes service or attempted service of any legal process or demand letter on the person connected with the debt .
This will apply both to the collection of debts owed to his company and debts owed to others, whether companies or individuals.
Both physical and non-physical activities, such as visiting a debtor’s residence and making telephone calls to debtors, will be covered by the definition.
MHA said it is seeking comments from members of the public on its proposals.
He also said he recognizes that debt collection is a legitimate activity that facilitates the fulfillment of financial obligations.
“However, given the growing concerns, there may be a need to institute upstream regulatory interventions on the industry, to better manage the annoyances of such activities,” he said.
First, he proposed a licensing regime where those wishing to run a debt collection business would first have to apply for a license from the police. Those wishing to work for these companies will need to apply jointly with the company for approval.
MHA said this selection process is similar to the application process for many other regulatory regimes.
Licensed debt collection companies are required to follow rules such as keeping proper records on things like contracts with creditors, which will help police investigations in the event of a complaint.
The MHA has also suggested imposing a lower regulatory burden on businesses whose primary business interest is not debt collection, but who nonetheless engage in such activities to collect monies owed to them.
These companies include approved lenders, banks and finance companies. They do not need police approval to operate, but are required to comply with debt collection rules.
“This (class license framework) is based on the police observation that the majority of reports filed for debt collection harassment are against debt collection companies collecting debts on behalf of others, rather than companies collecting their own debts,” the MHA said.
The police can impose regulatory penalties for violations, such as revoking the business class license, which prevents them from collecting the debt.