Second Reading of Debt Collection Bill - Speech by Ms Sun Xueling, Minister of State, Ministry of Home Affairs and Ministry of Social and Family Development

1.   Mr Speaker, Sir, on behalf of the Minister for Home Affairs, I beg to move, “That the Bill be now read a second time.”

Introduction

2.   The number of police reports made against the conduct of debt collection businesses and debt collectors has remained high. From 2018 to 2021, an average of 367 reports were lodged each year. The reports were mainly against debt collection tactics aimed at pressuring debtors into payment by causing public embarrassment and inconvenience to them.

3.   Such tactics have attracted significant public attention and affected the public’s sense of safety and security. Let me share two examples.

4.   In 2019, a debt collector made multiple visits to a debtor’s home and workplace within a month to collect a debt. On three occasions, he wore a traditional Chinese funeral outfit to the debtor’s workplace, while carrying accessories including a banner with the debtor’s face, a funeral lantern and incense paper, and engaged in actions such as shouting loudly, chanting, kneeling and blowing a whistle. He refused to leave even when told that the debtor was not present. On one such occasion, he even shouted at the debtor’s colleague.

5.   Some of you might also recall that back in 2015, six debt collectors visited a debtor at a food stall in Funan Mall to collect a debt. They unfurled a large banner stating that debt recovery was in process and proceeded to disrupt the stall’s business, including harassing the staff and damaging the stall’s equipment.

6.   Such debt collection conduct is unacceptable and causes unnecessary alarm to members of the public. The debt collectors in both cases were successfully taken to task under existing legislation such as the Protection from Harassment Act and Penal Code. However, we need to ask ourselves, can we do more to prevent such problematic debt collection conduct from occurring in the first place?

7.   Debt collection is a legitimate economic activity that facilitates the fulfilment of financial obligations. However, individuals and businesses should not be subjected to debt collection methods that clearly exceed what may be considered reasonable pressure for payment, especially if these methods also affect the public’s sense of safety and security.

8.   There is thus a case to institute a regime to regulate the debt collection industry, and to address problematic debt collection conduct.

9.   Such an approach is not new. In countries like the United States and Australia, legislative levers have been put in place to regulate the conduct of debt collectors and take action against problematic conduct.

10.   We seek to achieve two key objectives through the introduction of the Debt Collection Bill:

(a) One , to regulate the debt collection industry and prevent problematic debt collection conduct by setting standards of entry into the industry and imposing appropriate licensing requirements on debt collection businesses and debt collectors; and

(b) Two , to reduce problematic debt collection conduct by putting in place appropriate levers to take errant debt collection businesses and debt collectors to task.

Introducing a Regulatory Framework for the Debt Collection Industry

11.   Today, businesses that carry out debt collection activities are not regulated. There is no legal definition for what constitutes a “debt collector”, nor is there an enforceable legislative framework.

12.   Without a regulatory framework, it is challenging to definitively assess the number of debt collection companies and debt collectors in Singapore. This is partly due to the variety of corporate structures that debt collectors can use for their operations. For example, some debt collectors exclusively collect debt on behalf of others, whereas others operate in-house as part of a parent business, such as debt collectors employed by licensed moneylenders, banks and financial institutions.

13.   There is a wide spectrum of companies operating within Singapore’s debt collection industry. At one end, there are debt collection companies which have consistently maintained high professional standards and pristine reputations. Some such companies service institutional clients such as banks, which in turn hold them to similarly stringent and auditable requirements. On the other end of the spectrum, however, there are debt collection companies that operate within less-established corporate structures and are willing to adopt a wider range of debt collection practices. These companies mainly serve small-scale enterprises or individuals. Most of the companies that are featured in police reports hail from this end of the spectrum, in part due to their more aggressive debt collection practices and tendency to skirt around the boundaries of the law.

14.   To improve oversight of the debt collection industry, the Bill will regulate:

(a)   Debt collection businesses, which collect debt from a debtor either on behalf of another person, or where the businesses themselves had acquired the debt, and their debt collectors; and

(b)   Entities carrying on a business which is primarily in the lending of money and collecting of money owed to their own business, which are already regulated by other Government entities today, such as banks and licensed moneylenders. For this reading, I will refer to them subsequently as “already-regulated businesses”.

15.   In order to reduce regulatory burden and costs for businesses, the licensing requirements for each type of entity will be calibrated based on the law and order risk posed by its debt collection activities.

16.   In assessing the law and order risk, we considered indicators such as the number of harassment reports made against such businesses over the years.

Regulating Debt Collection Businesses and Debt Collectors

Regulating Debt Collection Businesses, Debt Collectors and Key Appointment Holders of Debt Collection Businesses

17.   Clauses 6(1) and 7 to 13 set out a licensing regime for debt collection businesses which collect debt from a debtor either on behalf of another person; or where the businesses themselves had acquired the debt, for example, factoring companies that provide cash or financing to other companies in exchange for the debts owed to the companies. Clauses 17 to 21 set out an approval regime for the deployment of their debt collectors. The business models of such entities lend themselves to higher law and order risk.

18.   Under the licensing regime:

(a)   A business must apply for and obtain a licence to carry out debt collection activities.

(b)   An individual who is deployed as a debt collector by a licensed debt collection business must make a joint application with the debt collection business, and must obtain an approval to be so deployed, before he or she can carry out any debt collection activity.

19.   There is no restriction on the number of debt collection businesses for which a debt collector can work. A debt collector can be granted multiple approvals to work for various debt collection companies at any one point in time.

20.   All debt collection businesses, including their key appointment holders, and the debt collectors, will be screened by the Police and must be assessed to be fit and proper before they are granted a licence or an approval.

21.   In assessing whether an individual is fit and proper, the Licensing Officer will take into consideration, among other things, prior offences committed by the individual that are relevant in determining the propensity of an individual to engage in problematic debt collection conduct. Generally, these could include offences involving harassment or violence. The severity of the offence and the length of time that has passed since the commission of the offence will also be considered. Applicants who fail to meet the fit and proper criteria will not be allowed to carry on a debt collection business or carry out debt collection activities.

22.   The fit and proper criteria will be set out in subsidiary legislation. The Police will also publish the criteria and requirements on their website.

Deterring Problematic Debt Collection Conduct

23.   To deter debt collectors from engaging in problematic debt collection conduct and causing disamenities to members of the public, Clauses 10 and 21 allow the Licensing Officer to impose conditions on licensed debt collection businesses and their approved debt collectors. Clause 45 allows the Minister to make regulations to guide the conduct, and stipulate the duties and responsibilities, of debt collection businesses and their debt collectors.

24.   Regulations that we intend to introduce include:

(a)   One, requiring debt collectors to verify that the person from whom they are attempting to collect debt is indeed the debtor; as well as

(b)   Two, prohibiting debt collectors from continuing to collect debt from a debtor, if the debtor has informed the debt collection business or collector, by any verifiable means, that the debt is in dispute or that the debtor has initiated a process to settle the debt through other means, which could include mediation or court proceedings.

25.   We also intend to introduce regulations stating that a debt collector must not engage in certain conduct when carrying out debt collection activities, such as displaying or engaging in any behaviour that threatens the physical safety of the debtor or any other third parties like the debtor’s family members, or affixing notices in relation to the debt on a property that does not belong to the debtor or at any public place.

26.   Let me give three examples of prohibited conduct when carrying out debt collection activities:

(a) First , a debt collector brandishing his fist to the debtor, or threatening physical harm to the debtor or his or her family.

(b) Second , sending text or social media messages to the debtor threatening physical harm to the debtor or his or her family.

(c) Third , pasting a notice with the debtor’s identity information on the door of the debtor’s neighbours.

27.   For such cases, where a contravention of regulations is made out upon investigations, the offender will be liable on conviction to a fine not exceeding $10,000 or imprisonment for a term not exceeding 12 months or both. For repeat offenders, the punishment will increase to a fine not exceeding $20,000 or imprisonment for a term not exceeding two years or both.

28.   Regulatory action can also be taken against the offender, including revocation or suspension of licence, or cancellation or suspension of approval, under Clauses 22, 24, 25 or 27.

29.   Debt collection conduct involving the commission of criminal offences, and which do not fall under the regulations, will continue to be dealt with under existing legislation such as the Protection from Harassment Act and Penal Code.

Regulating Businesses such as Banks and Licensed Moneylenders

30.   Next, we will be class licensing already-regulated businesses, such as licensed moneylenders and banks. They are assessed to pose lower law and order risk compared to debt collection businesses that are not currently regulated.

31.   Clauses 6(2), 14 and 15 set out a class licensing regime for already-regulated businesses whose core business includes lending and collecting money owed to their own business. They will be allowed to carry out debt collection activities if they comply with the class licensing conditions, and they do not need to apply for an individual licence. This will minimise regulatory compliance costs.

32.   The list of regulated businesses is set out in Part 2 of the First Schedule.

33.   Under the class licensing regime:

(a)   An already-regulated business need not apply for or obtain an individual licence to carry out debt collection.

(b)  An individual who is employed by a class licensed debt collection business to collect debts will not need to be approved by the Licensing Officer.

34.   Businesses and individuals under the class licensing regime also need not be subject to screening by the Police to assess if they are fit and proper.

35.   Notwithstanding the above, Clause 22 allows the Licensing Officer to take regulatory action against individual class licensees, including disapplying a class licence, if the Licensing Officer finds that the class licensee has contravened any class licensing conditions. This serves as a safeguard against class licensed businesses that may engage in errant debt collection conduct.

Persons and Entities not Covered under the Bill

36.   Persons and entities, other than debt collection businesses and already-regulated businesses, that collect debts owed to themselves (that were not acquired from another party), will not fall within the scope of the Bill. Examples include individuals collecting personal loans owed to them, or retail companies with in-house credit control departments collecting debts owed to the company. For avoidance of doubt, the conduct of such collections would still be governed by other laws.

Excluded Entities

37.   Entities, whose activities have been assessed to pose minimal law and order risk, will be excluded from the scope of the Bill.

38.   These entities are set out as excluded persons under Part 1 of the First Schedule. They are:

(a) Individuals who conduct court-administered debt collection activities , such as the Official Assignee or the Official Receiver;

(b) Law practice entities and insolvency practitioners that are already regulated under the Legal Profession Act 1966 and the Insolvency, Restructuring and Dissolution Act 2018, respectively; and

(c) Entities which acquire a debt or debts through acquiring or merging with a business (other than a debt collection business) in a transaction that includes the transfer of accounts receivable, or through the seizure of accounts receivable under a security agreement.

39.   This list of excluded persons will be reviewed periodically. If it is assessed that there is a need to regulate any of the excluded persons in the future, we will do so.

Offences and Penalties

40.   The Bill also introduces other offences and penalties.

41.   Clause 6 sets out offences for:

(a)   One, the carrying on of a debt collection business without a valid licence; and

(b)   Two, the conduct of any debt collection activity by an already-regulated business without a valid class licence.

42.   Such offences will attract a fine up to $20,000 or imprisonment for a term not exceeding two years or both. For repeat offenders, the punishment is a fine not less than $20,000 and not more than $100,000 or imprisonment for a term not exceeding five years or both.

43.   Clause 17 sets out offences for:

(a)   One, individuals who act as debt collectors for debt collection businesses without approval; and

(b)   Two, individuals who act as debt collectors for entities carrying on already-regulated businesses where the entities are not class licensees or where the individuals are not employed by these entities.

44.   Clause 18 sets out the offence for licensees who deploy individuals to act as debt collectors, where such deployment has not been approved.

45.   Offenders will be liable on conviction to a fine not exceeding $10,000 or imprisonment for a term not exceeding 12 months or both. Repeat offenders will be liable on conviction to a fine not exceeding $20,000 or imprisonment for a term not exceeding two years or both.

Powers for Police to Administer the Regulatory Framework

46.   The Bill provides powers for the Police to administer the regime. These include:

(a)   One, powers related to the administering of the licensing and approval regimes;

(b)   Two, powers of entry into premises used for a debt collection business or already-regulated business and other powers following such entry;

(c)   Three, powers of investigations, including powers to require relevant persons to provide information or attend before the Police; and

(d)   Four, powers to appoint non-public officers as compliance officers, who will assist with inspections of regulated parties.

47.   These powers are similar to those accorded to Police under other regulatory regimes, such as the Massage Establishments Act.

Appeals

48.   The Bill allows persons, including applicants and licensees to appeal to the Minister against an appealable decision made by the Licensing Officer. Appealable decisions include the refusal to grant or renew a licence and the refusal to grant an approval for an individual to be deployed as a debt collector.

49.   The Minister’s decision on an appeal is final. Unless otherwise directed by the Minister, the decision appealed against must be complied with until the determination of the appeal.

Savings and Transitional Provisions

50.   Lastly, the Bill provides saving and transitional provisions to ensure that sufficient time is provided for existing debt collection businesses and debt collectors who wish to continue operating their debt collection business or acting as debt collectors to transit into the new regimes.

Conclusion

51.   To conclude, this Bill seeks to introduce a regulatory framework, to improve the conduct of the debt collection industry and better address disamenities that may arise from problematic debt collection conduct.

52.   Mr Speaker, Sir, I would now like to conclude in Mandarin.

53.   收债是一种合法的经济活动，以便使债务人履行清还债务的责任。然而，收债人不应该以极端的收债行为，向个人或企业收取欠款，更不应该在收债过程中滋扰公众或造成社会不安宁。

54.   因此，为遏制像这样的公共滋扰行为：

(a)   我们将对收债行业设立监管制，设定收债行业的标准和门槛，以及规定收债公司和收债人员必须遵守的执照制度，以规管收债行业，防止收债人员以不当的行为收取欠款。

(b)   同时，我们也会设定适当的条例来惩处那些以不当行为收取欠款的收债公司和收债人员。

55.   为了减少企业的监管成本和负担，我们将根据不同类别的机构在收债时违反法律和扰乱公共秩序的风险，分级进行规管。在新法案下：

(a)   收债公司必须申请并获得执照，并为旗下收债人员的行为负责。申请者和收债人员必须经过警方筛查确认是否合格，才能进行收债活动。

(b)   受监管的贷款和收取欠款业务的机构，如银行和有执照或豁免的放债人，无须个别申请执照。雇员也不必额外申请许可证。

56.   我相信这项法案将有助于我们更好地管制我国的收债活动，从而制止不当的收债行为，确保社会安宁。

57.   Mr Speaker, Sir, I beg to move.