Mr Speaker sir, I view this Bill as a step in the right direction and do not object to it. My speech will focus on several suggestions to improve our debt collection and management regime.
I shall focus my speech on four major points.
Firstly, proposals to simplify the regulation of debt collection. Secondly, suggestions to provide transparency and accountability to members of the public. Thirdly, highlighting some risks associated with leaving debt collection activities to be regulated by private actors. Fourthly, ideas to strike a balance between inclusivity and encouraging robustness in the licensing regime regulating debt collection.
Apart from these major points, I would like to also briefly touch on a few wider social issues regarding debt. Before I proceed, I declare my interest as the Chairman of an international research consultancy that has undertaken work in the field of debt management and legal moneylending, among other sectors.
My first point is on the powers which the BIll gives to compliance officers, who are private actors.
To begin with, I note that the Debt Collection Bill grants powers to public officers, who may issue various different codes of practices. Such public officers may then appoint private actors – known as compliance officers – who would enforce and apply these codes of practice when examining the conduct and licensing status of debt collectors.
Such compliance officers are empowered to grant and renew licenses to debt collection firms, and to conduct investigations on such debt collection companies. This role would require sufficient training and familiarity with possibly multiple codes of conducts on the part of compliance officers.
Simplify the regulation of debt collection
This bill empowers private actors to act as compliance officers, to take investigatory and enforcement action against debt collectors. Clause 4(1) of the Bill specifically provides that an individual who is appointed as a compliance officer cannot be an employee of a public authority or a public officer. As such, neither the debt collector, nor the compliance officers who oversee them, are public officers with statutory powers vis-à-vis the public. Privatisation of this regulatory mechanism may hold potential complications for both the debt collectors and the members of the public.
Given that debt collectors will have frequent touch points with members of the public, it is of importance that the powers, rights and identities of such debt collectors should be easily understood by the public. However, the public will face significant challenges in verifying whether such debt collectors are legitimate. Furthermore, members of the public may not know the multiple codes of practices that may be proposed which pertain to debt collectors. An example of an existing Code of Practice is the Credit Collection Association of Singapore’s Code of Conduct and Practice, and there may also be other new codes of practice which are proposed and implemented by the Licensing Officer, under the BIll.
As such, members of the public may struggle in the following three areas. Firstly, to know whether people who claim to be debt collectors are indeed genuinely licensed debt collectors. Secondly, to know when debt collectors have crossed the line when collecting debts. Thirdly, to find avenues of recourse or feedback pertaining to any potential abuses of power by debt collectors.
It is for this reason that I propose for the following.
Firstly, that individuals from the debt collection companies should be required to show identification and their license before they engage in debt collecting activities. This would mirror the bill’s proposed requirement for compliance officers to carry “at all times” their identification card when examining the compliance of debt collection activities of regulated/unregulated businesses.
Secondly, in line with clause 13 of the bill, there should be an online directory available to the public to freely search and verify the licensed status of a debt collector. This would be consistent with current government resources, such as the moneylender’s directory which serves to inform the public as to who the licensed moneylenders are. This would bolster and strengthen the legitimacy of the debt collection industry by improving accountability.
Thirdly, as the Bill allows for the existence of multiple codes of practice which may apply to debt collectors, I propose that the various codes of practice which may be enacted in legislation and subsidiary legislation be unified, harmonised, and given legal effect. This would ensure certainty, and help members of public to have a common, clear understanding of the powers which debt collectors are allowed to exercise. Furthermore, this ensures transparency and minimises potential abuses of power. Taking the United States as an example, their Fair Debt Collection Practices Act is a federal law that prescribes one singular, unified and legally binding piece of legislation. This legislation draws a clear distinction between legitimate debt collection and harassment or otherwise unlawful behaviour.
Fourthly, public education and awareness campaigns should be conducted among members of the public, so as to educate them on what constitutes unacceptable debt collection behaviour by debt collectors. Furthermore, in order to deter errant debt collectors, perhaps the Minister could consider a reporting hotline, or a platform on a government-created app could be set up, to enable members of the public to report errant debt collectors. This would help to shift some of the burden of enforcement against errant debt collectors away from compliance officers/licensing officers, and to directly empower members of the public to raise issues with errant debt collectors.
Inclusivity vs ensuring robustness in regulating debt collectors
My next point is on the need to strike a balance between inclusivity and encouraging robustness in the licensing regime for debt collection. I note that Clause 8 of the Draft Bill provides that the Licensing Officer can only grant a license if the Licensing Officer is satisfied that the applicant is a fit and proper person to hold a license, and Clause 20 provides that the Licensing Officer can only grant approval for an individual to be a debt collector if they are satisfied that that individual is a fit and proper person.
However, the concern is that this might prevent existing individual debt collectors who are exemplary in their current work performance, but who have had some past involvement with the criminal justice system in respect of non-violent offences, or existing debt collection firms who are managed by individuals with such a background, from obtaining licenses under the proposed regime. For instance, in a Channel News Asia article, Resolute Debt Recovery raised concerns that “the proposed law would “put a lot of us out of business because most of these debt collectors are ex-inmates”, as “both of our directors have a chequered history”. Of course, this does not mean that the granting of licenses should be oblivious to a person’s past record, but there are different types of past offences and it would seem fair that for certain types of past offences, after a certain period of time, this should not count against the individual entering this profession. Such an approach is consistent with the spirit of unlocking the second prison.
In terms of determining whether individuals are fit and proper people to be debt collectors, I suggest that companies be allowed to send testimonials in on behalf of their existing employees who might otherwise fail the approval process due to their previous convictions; and that adequate resources and process be put in place to hear such appeals. Furthermore, when considering whether an applicant for a license is a fit and proper person, I would urge the government to take into account factors such as the company’s record, years of experience and complaints record in deciding whether or not to grant the licenses.
Wider social issues regarding debt
I would like to conclude my speech by sharing some observations on wider issues regarding debt.
First, I note that currently, credit counseling services in Singapore are largely administered by private not-for-profit bodies, for example, Credit Counselling Singapore (CCS). CCS facilitates a Debt Management Programme to help suitable borrowers repay their loans in manageable instalments. However, for such debt management programs provided by NGOs, not every borrower is eligible, and credit counsellors are not obliged by statute to define, prescribe, apply or enforce any eligibility criteria.
I hope the government can look into how credit counseling can be made more widely available, as well as for the eligibility criteria for various debt repayment schemes or debt management programmes to be expanded. My colleagues Hougang MP Dennis Tan and Sengkang MP Louis Chua has made similar arguments in his speech.
I also want to suggest that the government works with not-for-profits and researchers to collect data on the reasons for which individuals experience debt management issues, so that financial literacy programs like Moneysense can be focused on addressing those issues and common mistakes. I would also like to call for more attention in financial education programs to be given on risky retail financial products, such as some kinds of cryptocurrency products, which anecdotally have attracted many younger retail investors.
Second, a 2019 study was reported in the Straits Times, which showed that chronic debt hurts the ability of poor to make good decisions. A private charity, the Methodist Welfare Services (MWS) developed the MWS Family Development programme: for every dollar of debt cleared by clients on their own, MWS will match with $2. This programme is targeted at low income families living on per capita income of less than $850.
As a reference point, in the UK, borrowers who are unable to pay their debts are generally eligible for Debt Relief Orders if they meet criteria such as owing less than 30,000 pounds (around S$50,000), having less than 75 pounds a month in spare income (around $130), and having less than a certain threshold of assets. In exchange for accepting certain restrictions for 1 year, these borrowers will be free from their debt after that 1 year.
In view of these examples, would the Government consider launching similar debt reduction programmes for low-income families, with the aim of enabling them to escape the poverty trap, perhaps tied to participation in financial literacy programs. This could be part of the holistic support provided by the social care sector to the poor, which includes many chronically indebted persons.