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22-12-2012, 08:33 AM
Yes it is about time something like this was put in place! The next thing MAS can do it to clamp down on car loan requirements!
The Straits Times
www.straitstimes.com
Published on Dec 22, 2012
MAS wants tougher rules on credit cards
Changes proposed to dissuade people from spending beyond their means
By Yasmine Yahya
SINGAPORE'S central bank is proposing tough changes to rules on credit cards and unsecured credit to discourage consumers from spending beyond their means.
The Monetary Authority of Singapore (MAS) suggests that if a customer rolls over debt on his credit cards or revolving credit, his bank should warn him how much debt he will run up as a result. It also recommends that banks be barred from making unsolicited offers to lift customer credit limits.
And if a consumer does not pay his debt with a bank for more than 60 days past due, he should be barred from charging more credit to that bank until the debt is paid.
He should also not get new cards and unsecured credit from any bank, until he has paid up.
The proposals were in a consultation paper released yesterday.
But this has come too late for some. A 50-year-old marketing employee told The Straits Times she used to pay only the minimum sums on her seven credit cards.
But when her monthly pay was cut from $3,000 to just over $1,000, she could not pay that.
"They start to charge you interest rates and late payment charges of $50 and if you want to prevent legal action, you have to pay those first, so you never get to start paying off the principal amount," said the divorced woman, who declined to be named.
Her debt spiralled to about $50,000. "I 100 per cent agree with these changes because once it escalates... you cannot manage it, but if the problem is nipped in the bud, it would be good."
MAS said in the paper: "Lenders and borrowers both have a role to play in ensuring that credit cards and unsecured credit are used responsibly and within the borrower's means to repay."
Bankers believe MAS is making a pre-emptive move, as overstretched consumers may find themselves in a vulnerable position if the economy worsens.
Industry data shows that overall consumer delinquency here has fallen in the past decade even as people charge more to their cards.
Credit Bureau (Singapore) said in October that the average monthly credit card balance per consumer has jumped 54 per cent since 2002 to $5,034 this year.
But the average delinquency rate for credit cards dropped from 2.4 per cent of credit card holders in 2002 to 2.07 per cent this year.
Credit Counselling Singapore data shows those being counselled for debt problems rose from 1,066 in 2010 to 1,480 during January to November this year.
The average outstanding debt for such people is up 8 per cent since 2010 to $79,262 this year.
MAS data, meanwhile, shows that the level of bad debts written off by banks has risen recently, to 5.1 per cent of average outstanding credit card debt in the third quarter from 4 per cent in the fourth quarter of last year.
Both DBS Bank and OCBC said credit usage is on the rise but that most customers pay on time.
Another proposal requires banks to review outstanding debt and credit limits for all loans taken by a borrower at different financial institutions before granting new credit. Standard Chartered's Singapore head of consumer banking Dennis Khoo said this would ensure banks extend credit to those who can service it.
The MAS also proposes more flexible credit card rules for retirees. Those above 55 qualify for a credit card only if they have an annual income of at least $15,000.
Under the proposal, they qualify if they meet any of these rules: annual income of at least $15,000; net personal assets above $750,000 or a guarantor with annual income of at least $30,000.
The Association of Banks in Singapore said it supports the objectives of the MAS' proposed set of measures, and will collate member banks' views and feedback on the proposals.
yasminey@sph.com.sg
--------------------
MAS' proposals for unsecured credit
1 Banks will have to review a customer's outstanding debt and credit limits with all banks, before granting a new credit card, unsecured credit facility or an increase in credit limit.
2 Banks will have to warn customers who roll over debt on their credit cards and revolving credit lines of the potential cost and debt they will accumulate as a result.
3 Banks cannot make unsolicited offers to increase customers' credit limits.
4 Before increasing the credit limit on credit cards, charge cards or unsecured credit facilities, banks will have to conduct checks with credit bureaus and get updated income documents.
5 When banks are alerted of potential debt problems of a borrower, they need to re-assess his credit-worthiness.
6 Applicants should be able to state their preferred credit limits on application forms for new credit cards, charge cards, revolving credit lines and credit limit changes.
7 People whose debts with a bank are more than 60 days past due will no longer be allowed to charge new amounts to the credit card or credit line with that bank until they pay.
In the meantime, they are barred from obtaining new cards, unsecured loans or credit limit increases from any bank.
8 The same will apply if their unpaid credit debt exceeds two months of their income for six straight months or more.
9 Individuals above 55 years can qualify for credit cards if they have an annual income of at least $15,000, net personal assets exceeding $750,000 or a guarantor with an annual income of at least $30,000.
10 Banks will have to conduct checks with a credit bureau and obtain a customer's written consent before issuing credit cards with credit limits of $500 or less.
The Straits Times
www.straitstimes.com
Published on Dec 22, 2012
MAS wants tougher rules on credit cards
Changes proposed to dissuade people from spending beyond their means
By Yasmine Yahya
SINGAPORE'S central bank is proposing tough changes to rules on credit cards and unsecured credit to discourage consumers from spending beyond their means.
The Monetary Authority of Singapore (MAS) suggests that if a customer rolls over debt on his credit cards or revolving credit, his bank should warn him how much debt he will run up as a result. It also recommends that banks be barred from making unsolicited offers to lift customer credit limits.
And if a consumer does not pay his debt with a bank for more than 60 days past due, he should be barred from charging more credit to that bank until the debt is paid.
He should also not get new cards and unsecured credit from any bank, until he has paid up.
The proposals were in a consultation paper released yesterday.
But this has come too late for some. A 50-year-old marketing employee told The Straits Times she used to pay only the minimum sums on her seven credit cards.
But when her monthly pay was cut from $3,000 to just over $1,000, she could not pay that.
"They start to charge you interest rates and late payment charges of $50 and if you want to prevent legal action, you have to pay those first, so you never get to start paying off the principal amount," said the divorced woman, who declined to be named.
Her debt spiralled to about $50,000. "I 100 per cent agree with these changes because once it escalates... you cannot manage it, but if the problem is nipped in the bud, it would be good."
MAS said in the paper: "Lenders and borrowers both have a role to play in ensuring that credit cards and unsecured credit are used responsibly and within the borrower's means to repay."
Bankers believe MAS is making a pre-emptive move, as overstretched consumers may find themselves in a vulnerable position if the economy worsens.
Industry data shows that overall consumer delinquency here has fallen in the past decade even as people charge more to their cards.
Credit Bureau (Singapore) said in October that the average monthly credit card balance per consumer has jumped 54 per cent since 2002 to $5,034 this year.
But the average delinquency rate for credit cards dropped from 2.4 per cent of credit card holders in 2002 to 2.07 per cent this year.
Credit Counselling Singapore data shows those being counselled for debt problems rose from 1,066 in 2010 to 1,480 during January to November this year.
The average outstanding debt for such people is up 8 per cent since 2010 to $79,262 this year.
MAS data, meanwhile, shows that the level of bad debts written off by banks has risen recently, to 5.1 per cent of average outstanding credit card debt in the third quarter from 4 per cent in the fourth quarter of last year.
Both DBS Bank and OCBC said credit usage is on the rise but that most customers pay on time.
Another proposal requires banks to review outstanding debt and credit limits for all loans taken by a borrower at different financial institutions before granting new credit. Standard Chartered's Singapore head of consumer banking Dennis Khoo said this would ensure banks extend credit to those who can service it.
The MAS also proposes more flexible credit card rules for retirees. Those above 55 qualify for a credit card only if they have an annual income of at least $15,000.
Under the proposal, they qualify if they meet any of these rules: annual income of at least $15,000; net personal assets above $750,000 or a guarantor with annual income of at least $30,000.
The Association of Banks in Singapore said it supports the objectives of the MAS' proposed set of measures, and will collate member banks' views and feedback on the proposals.
yasminey@sph.com.sg
--------------------
MAS' proposals for unsecured credit
1 Banks will have to review a customer's outstanding debt and credit limits with all banks, before granting a new credit card, unsecured credit facility or an increase in credit limit.
2 Banks will have to warn customers who roll over debt on their credit cards and revolving credit lines of the potential cost and debt they will accumulate as a result.
3 Banks cannot make unsolicited offers to increase customers' credit limits.
4 Before increasing the credit limit on credit cards, charge cards or unsecured credit facilities, banks will have to conduct checks with credit bureaus and get updated income documents.
5 When banks are alerted of potential debt problems of a borrower, they need to re-assess his credit-worthiness.
6 Applicants should be able to state their preferred credit limits on application forms for new credit cards, charge cards, revolving credit lines and credit limit changes.
7 People whose debts with a bank are more than 60 days past due will no longer be allowed to charge new amounts to the credit card or credit line with that bank until they pay.
In the meantime, they are barred from obtaining new cards, unsecured loans or credit limit increases from any bank.
8 The same will apply if their unpaid credit debt exceeds two months of their income for six straight months or more.
9 Individuals above 55 years can qualify for credit cards if they have an annual income of at least $15,000, net personal assets exceeding $750,000 or a guarantor with an annual income of at least $30,000.
10 Banks will have to conduct checks with a credit bureau and obtain a customer's written consent before issuing credit cards with credit limits of $500 or less.
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