Debt collection in Singapore is a regulated process designed to recover unpaid debts from individuals or businesses who have defaulted on their financial obligations. This process is aimed at ensuring that creditors can recover unpaid debts in a fair and ethical manner. The Singapore debt collection service industry is governed by laws such as the Debt Collection Act, which sets firm guidelines for companies and individual collectors. This article delves into the specifics of Singapore’s Debt Collection Act, focusing on its key provisions, licencing requirements for debt collection companies and individual collectors, and how a lawyer in Singapore can help provide effective legal solutions for debt recovery.
Introduction to the Debt Collection Act
The Debt Collection Act (“the Act”) came into force on 1 December 2023. The Act was passed by Parliament on 13 September 2022. Its purpose is to regulate the debt collection industry by imposing standards of entry and introducing licensing requirements for debt collection companies and collectors. Furthermore, it aims to reduce problematic debt collection conduct by introducing mechanisms to deal with errant debt collection companies and collectors. This is significant as it is the first regulation introduced for the Singapore debt collection service industry. However, it is important to note that the Act applies only to the collection of monetary debts. As such, the collection of non-monetary assets (eg. cryptocurrency) remains unregulated.
New Licensing Requirements for Debt Collection Companies
One key feature of the Act is the newly introduced licensing regime for debt collection companies. Pursuant to Section 6 of the Act, debt collection companies must apply for a valid licence to carry out debt collection activities. Debt collection companies must be assessed by the police to be fit and proper before they are allowed to offer debt collection services. From 1 March 2024 onwards, debt collection companies must be licensed to carry out debt collection activities. Operating without a valid licence will be considered an offence, punishable by a fine of up to $20,000, imprisonment for up to two years, or both. Repeat offenders face even harsher penalties, including a fine ranging from $20,000 to $100,000, imprisonment for up to five years, or both.
Class Licensing Regime for Lower-Risk Entities
The Singapore government has implemented a class licensing regime, which applies to lower-risk organisations that are regulated by other government agencies involved in lending and debt collection. This includes banks, merchant banks, licenced credit card or charge card issuers, finance companies, and licensed and exempt moneylenders. These companies need not attain individual licences. Nonetheless, they must comply with the conditions of the class licence.
Approval Process for Individual Debt Collectors
Further, the Act has introduced a new approval regime for individual debt collectors. Any person who wishes to become a debt collector must submit a joint application with the debt collection company. Debt collectors will also be screened and assessed by the police to determine whether they are fit and proper. Police may rescind approvals if they are found to have committed offences, or breached any provisions under the Act.
Exemptions and Exclusions under the Act
Companies involved in debt collection in Singapore are deemed to pose low risk of public disorder and are excluded from the Debt Collection Act. Excluded entities include the Official Assignee, the Official Receiver, licensed insolvency practitioners, regulated legal practitioners and regulated non-practitioners, joint law ventures, licensed foreign law practices, qualifying foreign law practices, Singapore law practices, accounting corporations, accounting firms, accounting limited liability partnerships, chartered accountants, and public accountants.
Impact of the Debt Collection Act
Overall, this move to increase regulation within Singapore’s debt collection service industry is a positive and necessary development. Minister of State for Home Affairs Ms. Sun Xueling aptly stated that “debt collection is a legitimate economic activity that facilitates the fulfilment of financial obligations.” However, it is important to guard individuals and businesses against unreasonable debt collection methods, especially if these methods infringe on public safety and security. The Act and the regulation it introduces will lend greater legitimacy to the debt collection industry and mitigate against problematic debt collection methods.
Effective Legal Solutions for Debt Recovery by Christopher Bridges Law Corporation
The Debt Collection Act has introduced appropriate licensing and regulatory standards for debt collection companies and individuals in Singapore, with the aim of curbing improper practises. All debt collection companies are now required to hold a valid licence to operate legally, with severe penalties imposed for non-compliance. However, the Act excludes low-risk organisations such as banks, legal practitioners, and accountants, making it an essential step towards legitimising the Singapore debt collection service industry.
A Singapore lawyer specialising in debt collection will ensure the process is managed with the utmost professionalism and provide effective legal solutions for debt collection in Singapore. Whether you are a service provider or a supplier with outstanding invoices, Christopher Bridges Law Corporation offers professional and legal assistance by means of issuing standard letters of demand at highly competitive rates. If payment remains unpaid, we will proceed with legal action by filing a Claim in Court to recover the owed amounts. Our primary focus is on not just obtaining a judgement but securing the payment of your invoices, ensuring that you receive what is rightfully due.
Get in touch with our team at seccbridges@cbridgeslaw.com to schedule a free consultation.
