First Reading of Debt Collection Bill

1.   The Debt Collection Bill 2022 was introduced for First Reading in Parliament today. The Bill will empower the Ministry of Home Affairs (MHA) to regulate debt collection activities in Singapore and provide Police with the necessary levers to stem problematic debt collection conduct.

Background

2.   Over the past few years, there has been a high number of Police reports against debt collection companies and debt collectors for carrying out debt collection activities in a manner that caused alarm and nuisance to members of the public.

3.   In view of the increasing public concerns, MHA will institute regulations to better manage the disamenities arising from such activities.

4.   MHA has taken into consideration feedback provided through the public consultation exercise which was held from 15 to 29 June 2022.

Key Provisions of the Debt Collection Bill

5.    Debt collection is a legitimate activity that facilitates the fulfilment of financial obligations, and MHA will adopt a pragmatic approach towards regulating such activities. This Bill will provide us with legislative levers to impose upstream controls on the industry through a licensing regime for debt collection companies, and an approval regime for debt collectors. The key features of the Bill are set out below.

Definition of Debt Collection Activity

6.   The Bill will define debt collection activity to mean any activity undertaken in Singapore that involves finding the debtor of a debt, or requesting, demanding or collecting from the debtor money due under the debt.

Scope of Regulation

7. Licensing Regime . A licensing regime will be introduced for debt collection companies. ^[1] These companies will have to apply for a licence to carry out debt collection activities and will be held accountable for the conduct of their debt collectors. Debt collection companies, including their key appointment holders, must also be assessed by the Police to be fit and proper to offer debt collection services.

8.   Persons and entities who collect debts owed to themselves that were not purchased from another party do not fall within the scope of regulation, unless they are a regulated business as elaborated in the following paragraph. Examples include individuals collecting personal loans owed to them, and in-house credit control departments collecting debts owed to the company.

9. Class Licensing Regime . A class licensing regime will be introduced for entities carrying on a regulated business which is primarily in the lending of money and collecting of money owed to their own business.  This will include banks, merchant banks, licensed credit card or charge card issuers, finance companies, and licensed and exempt moneylenders. These entities will not be required to be individually licensed. Compared to individual licences, a class licensing framework allows the Police to impose regulatory conditions on such lower risk groups, while minimising regulatory compliance costs.

10. Approval Regime . An approval regime will be introduced for any person who wants to become a debt collector for a licensed debt collection company. The person will have to put up a joint application with the debt collection company for the Police’s approval. Debt collectors will be subject to screening by the Police and must be assessed to be fit and proper. Approvals can be rescinded, for example if the debt collector breaks the law, rules or regulations. Employees of class licensed companies collecting debts on behalf of these companies will not require approval.

11. Exclusions . Entities whose activities have been assessed to pose a low risk of public disorder will be excluded under the Bill. Such entities will include persons carrying out court-administered debt collection activities, licensed insolvency practitioners, regulated legal practitioners and non-practitioners, joint law ventures, licensed foreign law practices, qualifying foreign law practices and Singapore law practices.

Enforcement of Regulation

12. Offences for Unlicensed Debt Collection Activities . Unlicensed debt collection activities will be criminalised under the Bill, with penalties including fines and imprisonment for a term of up to five years. This will include the deployment of unapproved individuals to act as debt collectors for debt collection entities.

13. Breaches by Licensees, Class Licensees and Approved Debt Collectors . Actions will be taken against regulatory breaches. This will include the suspension or revocation of licences, class licences, or approvals.

14. Powers to Administer the Regime . The Bill will introduce powers for the Police to grant debt collection licences, to modify or add licensing, class licensing and approval conditions, and to suspend or revoke licences, class licences or approvals. These powers will be subject to the necessary safeguards, such as avenues for appeal and the requirement for the Police to give sufficient notice of their actions.

[1] Debt collection companies are entities in the debt collection business, where the business is of collecting any debt from a debtor (a) on behalf of another person, or (b) where the first-mentioned person has purchased the debt, as defined in S2(1) of the Debt Collection Bill.