Debt collection in need of cleaning up: ST Editorial
The way debt collection is carried out is extremely important. When it approaches harassment, it clearly needs to be stopped.
That a police licence may be needed to run a debt collection agency in Singapore is one of several rules under proposed laws to regulate the activities of such agencies and dissociate them from the strong-arm tactics often employed by loan sharks who operate illegally. Debt collection is a legitimate activity: delinquent debt can hurt a company's bottom line, particularly in the case of a small business. Debtors must not be allowed to behave with impunity but must be held to the fulfilment of their financial obligations. However, the way debt collection is carried out is extremely important. When it approaches harassment, it clearly needs to be stopped.
Indeed, there have been a high number of police reports made against debt collection companies and their staff for causing alarm and nuisance to members of the public. There were 134 such reports in 2015. This grew to 590 in 2018, before falling to 272 reports last year. The problem is that there are no regulations that deal specifically with what debt collectors can or cannot do. This loophole allows unscrupulous agencies to act in ways that are intimidating, including through speech, writings, signs or any visible representation. Their actions tarnish the reputation of the industry at large and create an association, in some minds, between the work of legitimate debt collectors and the tactics employed by illegal loan sharks to recover what they are owed.
That loophole will be plugged by requiring debt collection agencies here to obtain a police licence, one of several rules under proposed laws to regulate such activities. Debt collectors will also be required to first verify that the person from whom they are collecting debt is the debtor, according to details released by the Ministry of Home Affairs (MHA) recently. In addition, debt collectors will not be allowed to behave in a way that is physically threatening. The initiative by the MHA is a welcome one that will help to reduce the distress caused by the intimidatory tactics employed by some agencies which are emboldened by the absence of a regulatory framework. The requirement of a police licence will act as a deterrent and help weed out bad hats.
Industry players recognise that the proposals can reduce the stigma of collectors being otherwise associated with loan sharks, and should contribute to improving standards in the industry. There will hopefully be better public acceptance of the work of collectors given the legitimacy conferred by licences. Indeed, debtors, too, may perhaps take their obligations more seriously for this reason. There are some concerns that having to seek police approval on staff hires - another requirement - could make recruitment challenging. But having a regulatory framework in place is for the larger good of the industry - and indeed for those who may be at its receiving end.
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