Ministry of Home Affairs
Ministry of Home Affairs, Joint Operations Group
Consultation Period:
28 Sep 2021 - 26 Oct 2021
Status:
Closed

Detailed Description

Aim

1. The Ministry of Home Affairs (MHA) invites the public to provide feedback on our proposals to regulate debt collection activities in Singapore.

Background

2. Over the past few years, there has been an increase in the number of Police reports against debt collection companies and their staff for conducting debt collection in a manner that caused severe alarm and distress to the debtors and other members of the public (from 134 reports in 2015 to a peak of 590 in 2018). The yearly breakdown is in Annex A. In addition, debt collectors are increasingly employing strategies which straddle a grey area between high-intensity debt collection behaviour and outright violation of our public order and criminal laws. For example, some debt collectors have live-streamed their debt collection activities on social media platforms or unfurled banners outside debtors’ residence, with the intent of using public identification to pressure debtors to repay their debts. These cases affect the public’s sense of safety and security and pose public order concerns.

Proposals to regulate debt collection activities

3. MHA recognises that debt collection is a legitimate activity that facilitates the fulfilment of financial obligations. However, in view of the increasing concerns, we feel that there may be a need to institute upstream regulatory interventions on the industry, to better manage the disamenities from such activities. 

4. Our policy intent is to (i) ensure that only companies and individuals who are assessed to be suitable undertake debt collection activities, and (ii) set acceptable boundaries for the conduct of such activities. 
 
5. Our guiding principle is to calibrate the regulatory requirements based on the risk of the companies or individuals conducting themselves in a problematic manner when collecting debts. The proposals are below.

Definition of debt collection activity

6. We propose to define debt collection activity as any activity undertaken to collect or attempt to collect, directly or indirectly, any debt. This applies both to the collection of debt owed to one’s company and collection of debt owed to others (whether companies or individuals). The definition covers both physical and non-physical activities (e.g. releasing information about the debtor or the debt to other persons via social media). 

7. The definition is scoped broadly to prevent errant debt collectors from finding ways to circumvent the regulations, through employing novel strategies to recover debts. Notwithstanding, there are certain activities that MHA is prepared to exclude from regulations, such as the collection of an individual’s own personal debts. Our proposed exclusions for such activities are described in a later section. 

Licensing of Debt Collection Companies and requirement for them to seek approval for their staff 

8. We propose to introduce a licensing regime for debt collection companies (companies that carry out debt collection as a primary business, or collect any debt owed to others), and an approval regime for their staff (whether employees or contractors) collecting debts. As these parties are most likely to account for the majority of the problematic debt collection conduct, the tightest requirements will be applied on them. 

9. A person who wants to run a company that offers debt collection services will have to apply for a licence from the Police, while a person who wants to carry out debt collection activities for a debt collection company will have to jointly apply with the company for approval from Police. Individuals are only allowed to work for one licensed company at a time to ensure that companies have proper supervision over their employees’ conduct, thereby minimising the risk of problematic debt collection activities. 

10. All applicants will be subject to screening by the Police and must meet Police’s prescribed fit-and-proper criteria before being granted a licence or approval. This is similar to the application process for many other regulatory regimes. Licensed companies and approved staff will have to comply with debt collection rules and regulations, and penalties can be imposed for breaches. These are described further in paragraph 14.

Class licensing of companies with other commercial interests 

11. We propose to class license companies that have primary commercial interests that are not debt collection, and which conduct debt collection activity only to recover debts owed to their own business

12. Under a class licensing framework, companies which meet the stipulated criteria (i.e. the company has other commercial interests and they only collect debts owed to the company) will be automatically class licensed. They and their employees do not need to apply for licensing or approval from the Police, and thus need not pay any application fees. Nevertheless, class licensees and their employees must still comply with the debt collection rules when collecting the companies’ debts. Police can impose regulatory sanctions for breaches, such as revoking the class licence, thereby preventing the company and their employees from performing any debt collection activities unless they apply for an individual licence and approvals for staff as described in the previous section.

13. Class licensing is a calibrated licensing approach that imposes a lower regulatory burden compared to the individual licensing regime in the previous section. This is based on Police’s observation that the majority of reports lodged for debt collection harassment are against debt collection companies collecting debts on behalf of others, rather than companies collecting their own debts.

Debt collection rules

14. We propose to introduce rules for debt collection activities by licensees and class-licensed companies, and their staff. The rules will set out acceptable debt collection conduct, such as requirements for debt collectors to verify that the person from whom they attempt to collect debt is indeed the debtor, and times and locations where communication with debtors can take place, among other requirements. The proposed list of rules is in Annex B.

15. We will introduce offences and penalties for breaches. More serious offences, such as performing debt collection without a licence, will be included in the main Act with heavier penalties, while other debt collection offences will be introduced in subsidiary legislation or licensing conditions, with penalties tiered based on the egregiousness of the conduct.

Exclusions from debt collection regulations 

16. We propose to exclude the following groups from the debt collection regulations:

a. Individuals collecting personal debts. It is common for individuals to issue personal loans to friends and family, and such individuals are not likely to resort to problematic debt collection conduct to pursue these debts. Nevertheless, if individuals engage in criminal behaviour, they can still be liable for offences under the Protection from Harassment Act or the Penal Code.    

b. Industries that are already regulated. MHA is engaging several industry regulators, such as the Ministry of Law, to assess whether their industries can be exempted from the regulations. This is given that their activities pose low risk of public disorder and that their regulators already have controls over their conduct.

c. Collections conducted by or on behalf of the Government would also be exempted. This will include enforcement of Court judgments or orders by the Sheriff and Bailiffs of the Courts.  

d. Service of legal process. The regulations will exclude any person serving or attempting to serve any legal process (i.e. Court documents) on any other person in connection with the enforcement of any debt.

Other proposals

17. We propose to provide powers for Police to administer and enforce the licensing regime. The regulator will be the Police Licensing and Regulatory Department, which will have powers to grant or refuse applications for licences, to modify or add licensing and approval conditions, and to suspend or revoke licences or approvals. These powers will be subject to the necessary safeguards, such as avenues for appeal and the requirement for Police to give sufficient notice of their licensing actions. These powers are also provided in other regulatory laws administered by Police. Police will also have the powers of entry and inspection, of investigation, and to arrest persons who commit specified arrestable offences without warrant. 

Providing feedback 

18. We invite the public to share your views on the proposals via this link by 26 Oct 2021.

19. After the feedback closes on 26 Oct 2021, we will publish a summary of the key feedback received and our responses on this website, when ready.