Government proposes debt collection legislation, amid rising police reports against collectors who ’caused alarm and nuisance’

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SINGAPORE – The government is seeking to introduce laws to regulate debt collection activities in Singapore, following a “high number of police reports” against debt collectors who act “in a manner that has alarmed and embarrassed members of the public” over the past few years.

Announcing this in a statement on Wednesday June 15, the Home Office (MHA) noted that there were 272 police reports of debt collection harassment in 2021, compared to 134 reports in 2015. In 2018, a peak of 590 police reports were made on debt collection activities.

Currently, there are no regulations or laws regarding debt collection activities, said the MHA, which has launched a public consultation on the proposed rules.

Among other things, a debt collector must verify that the subject of his activities is indeed the debtor and not “displaying or using physically threatening words, behavior, writing, signs or visible representations”.

Another proposal is to introduce a licensing and approval scheme for debt collection companies and their staff.

“As these parties are most likely to represent the majority of problematic debt collection practices, the more stringent requirements will apply to them,” the MHA said.

This includes a selection process by the police and is “similar to the application process for many other regulatory regimes”.

The police will have the power to administer and enforce the licensing regime, such as granting and/or refusing license applications, changing license and approval conditions, and suspending or revocation of licenses or approvals.

DEFINITION OF COLLECTION ACTIVITY

The proposed legislation includes the definition of debt collection activity as “any activity undertaken to collect or attempt to collect a debt, but excludes serving or attempting to serve any legal process or demand letter on any person in the performance of a debt”.

This will apply both to the collection of debts owed to his company and to the collection of debts owed to others, whether individuals or companies.

Under the proposed settlement, both physical and non-physical activities, such as visits to a debtor’s workplace or residence and telephone calls to debtors, will be considered debt collection activities.

“The definition is broad to prevent errant debt collectors from finding ways to circumvent regulations,” the MHA said.

CLASS LICENSE

The proposed rules will not apply to legal practice entities and insolvency practitioners that are already regulated, collection activities conducted by or on behalf of the government, and debt collection activities administered by the courts.

“The MHA recognizes that debt collection is a legitimate activity that facilitates the fulfillment of financial obligations,” he said.

“However, given the growing concerns, there may be a need to institute upstream regulatory interventions on the industry, to better manage the downsides of these activities.”

A proposal made by MHA is to classify licensing companies that engage in debt collection intensively to collect debts owed to them, but have primary business interests that are not debt collection.

“These types of businesses will be specified in the proposed legislation and will include activities carried out by a pawnbroker, bank, merchant bank or licensed finance company,” he said.

Under this, businesses that fall under the license class will not need to apply for a license or approval. However, they must follow the debt collection rules that are part of the proposal.

On its reasoning for the class license approach, MHA said the majority of police reports filed for debt collection harassment are against debt collection companies collecting debts on behalf of others, rather than companies recovering their own debts.

COLLECTION RULES

Among other proposed rules, a debt collector must not:

  • Post or display any notice regarding a debt on any property, car, or workplace that does not belong to the debtor, or in a public place
  • Pursue any attempt to collect money or contact someone with verifiable means to show that the debt is in dispute and that the debtor wishes to settle the debt through other legal means, such as court or mediation

The bill, which does not specify potential penalties for non-compliance, can be viewed at https://go.gov.sg/mha-consultation-paper-debt-collection-regulations.

Members of the public can share their views on the proposals from June 15 to June 29 on https://form.gov.sg/#!/62a965da55ac2a001467095b.


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