MAS wants tougher rules on credit cards

Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
#1
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.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
Reply
#2
wonder why MAS did not do this earlier. Consumers only need protection when economy is going bad? Consumers deserve not much protection when economy is booming?

seems MAS is working for banks' interest rather than consumers' interest.
Reply
#3
maybe MAS feels that banks are no longer operating their business in a responsible manner...
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
Reply
#4
overall consumer delinquency here has fallen in the past decade even as people charge more to their cards.

it seem that credit card users are getting more prudent.
Reply
#5
This took a really really long time coming. But better late than never. One other thing that I don't like is the recent practice of "not requiring signature" for purchases below a certain amount. I personally think that's a regressive step in terms of customer protection.
Reply
#6
This may be the reason for MAS to crackdown on banks.....

More seeking help on debt problems
22 December 2012 2117 hrs (SST)
URL : http://www.channelnewsasia.com/stories/s...02/1/.html


SINGAPORE: More people are seeking help from Credit Counselling Singapore (CCS) on their debt problems.

In the first six months of this year, more than 700 people sought help from the organisation.

This is an increase of 40 per cent, compared to about 500 people who sought help in the same period last year.

To help those at risk of credit problems, the organisation suggested that the Monetary Authority of Singapore (MAS) tighten the criteria for individuals in their applications for unsecured credit facilities.

This refers to credit extended only on the basis of the debtor's promise to repay, without any collateral security.

In line with MAS regulations, a bank can grant such loans of up to four months of a person's pay.

CCS highlighted that with about 13 banks and credit card companies in Singapore, a person may be able to obtain loans from more than one institution.

There is thus a possibility that an individual can obtain unsecured credit facilities worth 52 months of their salaries.

This is a relatively large amount and could put individuals in debt if not used carefully.

To address this, CCS suggested limiting how much a person can borrow in total instead.

Tan Huey Min, general manager at CCS said: "Instead of limiting the banks to four months, we limit each person - how much can a person borrow in total. For example, there's a cap of 10 months of unsecured credit facilities a person can borrow. A bank can grant up to 10 months or perhaps the bank decides to grant only one month to the person.

"Let's say, 10 months is the limit. In order to get the customer, they can come up with packages that are so attractive that it makes the customer prepared to take up only credit facilities from them."

- CNA/xq
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
Reply


Forum Jump:


Users browsing this thread: 3 Guest(s)