Common Loan Shark Scam You Should be Aware

When you’re in an emergency and need fast cash, the last thing you want is to contact a loan shark. Many Singaporeans know that Ah Longs are dangerous people you shouldn’t mess with. The media is filled with horror stories about people who borrow from illegal moneylenders. There’s nothing too low for these scam artists, from death threats to painted doors and social media harassment.

So most Singaporeans know they shouldn’t do business with loan sharks.

MK Personal Loan Banner

That doesn’t stop illegal lenders either. Ah Longs will try various scams to prey on innocent people and get money from new, unsuspecting victims.

Here’s the worst part:

Loan sharks can get your phone number/ e-mail address and harass you even if you never did any business with them whatsoever.

To avoid that, read this article below. We’ll discuss the most common tactics that loan sharks apply and how to protect yourself. In the end, we’ll analyse some common tell-tale signs you’re dealing with an Ah Long in the first place.

The Debt Collector

Picture this:

You’re sitting peacefully one afternoon when suddenly your phone rings. Someone at the other end of the line starts yelling that you – or a loved one – haven’t repaid a specific debt.

They even throw in some threats to scare you more.

Imagine an elderly mother finding out that her beloved doctor son is indebted because of his gambling addiction. Then, the loan shark threatens this woman with disclosing this sensitive information about her son to everyone. They’ll threaten to post this on his social media, to contact his colleagues and even his patients.

Unless the woman repays her son’s debt or at least a meagre amount, say $5,000.

The loan shark will also claim there’s no time to contact the son or tell the mother that, of course, her son will deny the accusations.

So the woman forks out the money.

As you’re reading this, you already realise what mistake she made. Thus, if anyone contacts you about paying back a loan:

  • Don’t pay them anything if you’re sure you haven’t taken out a loan, or:
  • Double-check their credentials if you know you’re late paying a loan. Additionally, double-check with your loan agent to see if they really sent debt collectors to recover what you owe them.

Remember: Even if MinLaw doesn’t regulate debt collectors in Singapore, they still can’t break the law with threats, abuse, and violence.

The Legal Moneylender Scams

Loan sharks can impersonate legal moneylenders, and, unfortunately, many people fall for this trap too. There are at least two scams that Ah Long can try while pretending to be authorised lenders:

  1. Firstly, they can try to catch new victims. For example, they’ll print some very professional looking flyers about a licensed agency, with a fake registration number from MinLaw and all the other bells and whistles.

Next, they’ll loom around banks or legal moneylenders’ offices to see who’s been rejected and is desperate enough to get fast money without any questions. That can be you.

So, this loan shark can slip you a flyer or ask for your phone number to contact you with other offers.

Remember, Ah Longs will make a show of how empathic they are and how much they want to help you. They’ll underline that they’re only giving you some quick money without a contract because they care about helping people – unlike the evil banks.

However, that’s just a scam.

MK Personal Loan Banner

Licensed moneylenders aren’t allowed to contact you personally or to distribute flyers to advertise their business. They can only post ads in business and consumer directories plus on their websites.

Also, no licensed moneylender will ever lend you money without face-to-face verification at their legal offices.

Warning: If you ever borrowed money from a loan shark, trust that other Ah Long already know your number/ social media accounts etc. So, if you can’t repay the first loan shark, chances are another one will contact you with a too-good-to-be-true loan to get you out of trouble. And obviously, they’ll try to impersonate a legit moneylender to hook you.

  1. Secondly, moneylender impersonators can ask you to pay your debt. This scam is pretty similar to the one above, but in this case, the loan shark pretends to be calling from your bank/ agency.

Here’s the good part:

They’ll contact you around your payday.

Loan sharks know that instalments’ due dates are set around paydays because it’s easier to make payments when you’ve just received your salary.

And that’s the same reason you’re more likely to believe the fake moneylender when they tell you you’re late paying or that last month’s money hasn’t come in yet.

Luckily, the solution is simple in this case:

Politely end the phone call and then double-check with your moneylender to confirm if that call was genuinely legit or not. If not, block the loan shark’s phone number.

The Fee Transfer Scam

Some loan sharks may try to use the fee transfer scam to squeeze more money out of you in the long term.

Here’s how this scam works:

The loan shark finds out that you’ve applied for a loan. Perhaps he has listened to your conversation in a café or seen you exiting the bank with some paperwork.

Alternatively, maybe that Ah Long tricked you themselves into doing business with them.

So now they’re calling or texting you to say you need to pay an admin fee:

  • Because it’s a mandatory fee before approving your loan, or:
  • To hasten the application process, or:
  • To allow you to borrow a more significant amount

Some loan sharks can stop at this point. They can take the money they can squeeze from you and disappear, while others will try for more:

Your SingPass credentials.

The loan shark can like his way into getting your SingPass ID and password, which gives them access to your personal information. They can use that information either to blackmail you or to withdraw money from your accounts.

Here’s how to avoid getting duped:

Never pay anyone claiming to be a licensed moneylender a pre-approval admin fee. While MinLaw allows licensed moneylenders to impose admin fees, these charges represent a maximum of 10% from your principal amount, and they’re retained at the moment of the cash transfer.

Loan Sharks Tell-Tale Signs

Now you know how to recognise the three most common scams that loan sharks practice. But you’re not safe yet; loan sharks always come up with new tricks, and they’re very persuasive.

As a result, you can think you’re perfectly safe and still get duped.

Here’s what you should watch out for:

  • No license. Once someone contacts you pretending to be a licensed moneylender, ask for their full name and license number. Then, double-check those credentials on MinLaw’s list of legal moneylenders. Remember that this list is complete and updated, so don’t believe anyone who’s trying to explain why their name isn’t there.
  • No address. Licensed moneylenders are required by law to have a legal address where they conduct business meetings.
  • Fake license and address. Some loan sharks will copy the credentials from a licensed moneylender. So, visit that place of business or give the licensed moneylender a call to see if the person you spoke with is legit.
  • High fees. Licensed moneylenders can ask for limited fees:
    • A maximum of 4%/ month interest rate from the outstanding balance
    • A maximum of 4%/ month late interest rate from the instalment you missed
    • A maximum of $60 late repayment fee
    • A one-off maximum 10% admin fee when they grant you the loan
  • Too-good-to-be-true conditions, such as:
    • Letting you borrow more than the legal threshold, which is six times your monthly income
    • Giving you money on the spot, with no contract
    • Apparently letting you off the hook by not checking your paperwork at their headquarters
  • Abusive behaviour, such as:
    • Wanting to know your passwords
    • Withholding documents or personal assets
    • Threats
    • Violence
    • Harassment
    • Asking you to harass other debtors
  • Lack of contract or incomplete contract. Many loan sharks will avoid writing a contract because that kind of paperwork is not only irrelevant for them but also incriminating. So, if an agent is trying to wiggle their way out of signing a contract apparently for your sake, don’t believe them.

In Conclusion. How to Deal with a Loan Shark

Ah Long are dangerous and insidious people. If a loan shark contacts, threatens or harasses you:

  • Block their number or profile immediately.
  • Don’t do anything for them. Even if you owe the Ah Long money, don’t give it to them. Loan sharks may threaten to have you prosecuted if you don’t reimburse your loan, but they can’t do that. Not repaying a loan shark’s loan isn’t an actual crime.
  • Call the police if you feel that your life is in danger.
  • File an e-complaint or call the X-Ah Long hotline at 1800-924-5664.