We’ve seen enough dramas and movies to see how dreaded loan sharks take action. They kick down doors, break things, committing vandalism, and hurt people who owe money. While possible in real life, these acts are thankfully considered illegal practices and are not the kind of things you should expect from legitimate debt collectors in Singapore.
Debt collectors are, however, legal. They serve as debt recovery agents whose job is to recover any money owed and usually charge 15% of the remaining balance they are tasked to collect. Your creditor has a right to be paid, after all.
So what can you expect to experience when legal debt collectors come knocking at your door?
How far can debt collectors go?
Many a company and other loaning services can lose a lot of money because of non-paying clients. It is only natural and within their right to collect these debts.
Often, this task is relegated to debt collection agencies. The debt collection agency will then send one of its agents for debt recovery in place of its clients.
Some even provide tracking services and private investigator services apart from the standard debt collection services, as long as it is within their code of conduct set by the Credit Collection Association of Singapore.
The Code of Conduct of Debt Collection Agencies and Legal Debt Collection
There are no specific laws regulating debt collectors in Singapore, but they follow a code of conduct.
This code mainly encourages professionalism in debt collection with empathy and consideration, such as not putting any undue pressure on the debtors, being transparent during communication, notifying debtors of the process, and being open to further negotiate repayment terms.
The CCAS Code of Conduct and Practice isn’t a law, but is made of guidelines that every Singapore debt collection service is encouraged to follow, so for specifics, here are some of the things that a debt collector can do:
Statute of limitations to loans from family and friends
It’s not legal to lend to a business, but you can lend money to people you know at any mutually agreed-upon interest rate, even without a license.
The written agreement or IOU is, however, subject to a statute of limitations. If a debtor fails to make loan repayments or pay the sum, a lender has 6 years to commence legal proceedings before the IOU’s shelf life expires.
If there is no IOU, a debtor is not obliged to make a payment, even if you demand the services of a debt collection agency.
Debt collectors can talk to your family and friends
Anything a friend or relative can legally do if you owe them money is fair game in debt recovery. They can ask for further information about where you live, visit you at work during office hours, stalk your online profiles, and talk to your family members.
Debt collectors can negotiate loan repayment plans
A debt collector is more like an assertive salesman than a shakedown gangster, and many debt collection agencies are open to negotiating.
You may propose an instalment plan and their code of conduct encourages them to hear you out, provided you can prove that you don’t have the money to pay yet.
Likewise, a debt collector may even be inclined to offer you repayment solutions.
Illegal Debt Collection
While no law regulates debt collection agencies, they are still subject to other laws that a friend you borrowed money from would be. Here are what debt collectors can’t do:
Unlawful Assembly
Debt collectors can’t gang up on you. Any assembly of five or more people can be convicted of unlawful assembly if you can prove that their goal is to commit an offence to take your property.
Intimidation and Violence
Using abusive language and threatening physical violence is against the law. If a debt collector gives you the inclination that they might resort to threats or violence against you to collect a debt, you can call the police immediately.
Harassment
A debt collector is subject to the Protection from Harassment Act, a law that protects people from illegal practices like unlawful stalking and harassment. It is illegal for debt collectors to resort to abusive, insulting, or offending words and/or behavior.
You are well within your rights to report to the authorities if you see debt collectors skulking around your property in an intimidating manner.
Vandalism
Debt collectors that defame your property with spray paint, posters, banners, and the like break the law by committing vandalism.
Taking your property
Debt collectors cannot threaten you with seizing your belongings, such as your car, jewelry, and appliances, cannot do so unless they receive a writ of seizure via court order to settle your debts.
Impersonating government bodies
It is illegal for debt collectors to pretend to be government agents and forge documents with fake government letterheads.
What should you do when you experience illegal practices?
As long as you have sufficient proof of harmful behavior, debtors can report them to the police. Additionally, any complaints can be submitted directly to the Credit Collection Association of Singapore for any behavior that is outside their code of conduct.
What happens if you ignore debt collectors in Singapore?
If you avoid debt, recovery can affect you in different negative ways:
- Debt growth because of accumulated interest.
- Your credit score will suffer, affecting future attempts at loans.
- They will reach out to people you know.
- You could get sued.
- The stress of running and hiding will get to you.
Debt Growth
Even if you stop paying, the interest will not stop. Failing to pay will only lead to the continued growth of your debt, especially if the particular contract stipulates added fees and interest from failing to make repayment.
Credit Score Damage
Failing to make repayments will make your credit score suffer. Once a default in your score, it remains there for seven years.
It is in your best interest to avoid this, especially if you plan to apply for a mortgage someday.
Contacting Your Friends and Family
As discussed earlier, debt collectors are within their rights to contact your friends, family, and employer regarding your whereabouts.
While debt collectors cannot disclose information regarding your debts to anybody, this could lead the people you know to worry.
Debt Collection Lawsuit
Avoiding debt collection and failing to get in touch with a collector might force the agency to file a debt collection lawsuit against you.
You may very well try to defend yourself, but losing the lawsuit may lead to your properties being seized.
Stress
Running from your debt will not only affect your credit score and cost you money, but it might also lead to stressing you out because you’d always be on edge.
As stressful as it may be to face debt collectors, it may likely be equally or more stressful to avoid them.
You might find yourself struggling to go outside, jump at every knock on your door, and be bombarded by questions from friends and family regarding strangers that are looking for you.
Trusting the debt collection process: why you shouldn’t run from debt collectors
Avoiding a debt collection is not going to make a debt collector stop looking for you. If the debt is not yours, then you should, by all means, relay that.
If the debt is yours and you are avoiding collection because you can’t afford to pay it, you may inform the collector regarding your situation along with a proposal. Debt collectors are amenable to negotiate repayment.
If you receive correspondence from a debt collector, remain calm and prepare yourself before you respond.
- Check if the debt has been entered into your credit score.
- Figure out if you can afford repayment.
- If you can afford it, prepare a repayment plan.
- You also have the option to contact credit counselors and advisors who can walk you through budgeting plans.
Debt collectors may also be inclined to provide you solutions themselves, as the alternative would be you filing for bankruptcy, which means their clients will suffer a loss.
The bottom line
Singapore has a fairly borrower-friendly system, which is why debt collection is not something you should be wary of, especially when you borrow from legal and reputable financial institutions.
In fact, when it comes to a loan, you should go for moneylenders with flexible repayment terms, like the financial solutions provided by 365 Credit Solutions.
By applying for a loan with a dependable lender like 365 Credit Solutions, you can avoid missing repayments and having to be subject to debt collection altogether.
