ST : Look out, moneylenders who target HDB flat sellers

Apr 28, 2010

Look out, moneylenders who target HDB flat sellers

Govt drafting measures to curb exploitation of cash-strapped owners

By Rachel Lin

THE Ministry of National Development (MND) has sent a clear message to moneylenders who exploit cash-strapped HDB sellers: The game is up.

It is drafting measures to crack down on these unscrupulous credit companies, which lend money to home owners on the condition that they repay the loan from the sale of their flats.

The moneylenders usually collude with real estate agents who, in return for a referral fee, link them up with home owners.

In addition, a legal loophole allows moneylenders to file a caveat on the flat, which ensures that they get first bite of the proceeds when the flat is sold.

'HDB flats are not meant for short-term profit,' MND Minister Mah Bow Tan said in Parliament yesterday. 'They are not meant to be used as collateral for loans, whether to legal or illegal moneylenders.

'My ministry is currently working with the relevant authorities on appropriate measures to curb such abuses.'

Existing measures have not been sufficient to deal with the problem, Mr Mah added.

The credit companies in question advertise openly in the newspapers, with lines such as 'legal loan for HDB sellers' or 'for HDB seller only'.

Some advertisements also state 'property agent referral welcomed'. Loans of up to $100,000 are offered, at interest rates like 1.5 per cent per month.

The matter had been flagged by Madam Halimah Yacob (Jurong GRC), who told The Straits Times later that she had received many complaints from the public.

The problem was becoming rampant, she said. Credit companies have even sent out text messages touting their loans to home owners.

These loans eat into the amount that HDB sellers eventually get from their flats, once the repayments and other fees are accounted for. 'They're expecting $70,000, but in the end, they get only $10,000. Sometimes, they get almost nothing,' Madam Halimah said.

Mr Mah told the House that his ministry is treating the problem 'as a matter of urgency'.

Both the errant credit companies and the estate agents who collude with them will come under scrutiny, he said.

Tougher rules for moneylenders will be introduced before the MND's larger move to regulate real estate agents more tightly.

Currently, complaints against real estate agents go to the Inland Revenue Authority of Singapore (Iras) or the Consumers Association of Singapore (Case).

However, Iras is not empowered to investigate rogue agents. If the agent is a member of an agency accredited by the Singapore Accredited Estate Agencies (SAEA), Iras refers him or her to the SAEA.

If not, the case is handed directly over to the relevant estate agency.

This present system contains one major loophole, Madam Halimah pointed out to the House: 'If you are the real estate agency, I think there will be less reason for you to find fault with your own agents, because that will affect your name.'

Mr Mah agreed that such a loophole existed. The MND is thus looking into a formal registration process for estate agents, compulsory exams, avenues for mediation and dispute resolution and disciplinary measures for errant agents.

'If the whole industry is not regulated, and in the current climate especially, there are a lot of temptations for estate agents to take short cuts and indulge in questionable practices,' he said.

Last year, Iras received 44 complaints against real estate agents, down from 63 in 2008 and 47 in 2006, Mr Mah told the House.

Case received 1,079 complaints last year, compared to 1,100 in 2008 and 1,055 in 2007.

lyuexin@sph.com.sg


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NOT COLLATERAL

'HDB flats are not meant for short-term profit. They are not meant to be used as collateral for loans, whether to legal or illegal moneylenders.'

MND Minister Mah Bow Tan