SINGAPORE – Debt collection companies may soon be required to apply for a license to engage in debt collection activities and will be held accountable for the conduct of their employees.
This licensing regime was one of the key provisions of the Debt Collections Bill introduced in Parliament on Monday August 1 to regulate debt collection activities in Singapore and curb problematic debt collection practices following an increase in public complaints.
Debt collection activities without a license will be criminalized with penalties such as fines and up to five years’ imprisonment if the bill is passed, while a company that violates license terms may have their license suspended or revoked.
Anyone who wants to become a debt collector for a debt collection company will also have to file a joint application with their employer, and submit to a check by the police. Approvals can be canceled if the debt collector breaks the law.
Currently, there are no regulations that specifically address what debt collectors can or cannot do.
The Home Office (MHA) said on Monday the bill comes as a high number of police reports have been filed in recent years against debt collection companies and their debt collectors for alarming and bothered the public.
A total of 134 police reports were made in 2015, increasing over the years to a peak of 590 in 2018, the ministry said. Last year, 272 reports were filed against these companies and their staff.
Although there was a drop in reports made in 2020 and last year which may be due to Covid-19 restrictions, the number of reports remained high, an MHA spokesperson said in response to the questions from the Straits Times.
“In light of growing public concern, MHA will institute regulations to better manage the inconvenience resulting from such activities,” the department said. It also took into account comments provided during a public consultation exercise held in June.
The bill defines debt collection activity as any activity carried out in Singapore that involves finding the debtor of a debt, or requesting, demanding or collecting from the debtor money owed in respect of the debt.
Under the licensing scheme, debt collection companies must be assessed by the police, who will consider past offenses committed by the companies, such as those under the Organized Crime Act and the vandalism.
Individuals collecting personal loans owed to them and internal credit control departments collecting debts owed to one’s business fall outside the scope of the regulations.
A class licensing regime will also be introduced for regulated businesses that are primarily engaged in lending and collecting monies owed to their business. This includes banks, finance companies and approved lenders.
This will allow police to impose regulatory conditions on these low-risk groups while minimizing compliance costs, the MHA said.
The bill is expected to pass before the end of this year and come into force between mid-2023 and the first half of 2024.