MAS worked with the Ministry of Law to propose changes to the unsecured credit rules currently applied to financial institutions and to extend these rules to moneylenders. The proposed changes will more comprehensively implement the Government’s social policy of discouraging individuals from spending beyond their means while allowing individuals access to unsecured credit for occasional genuine borrowing needs.
Public consultations on the proposed changes were held in August 2006. Key policy changes include:
- A measured step of lowering the minimum annual income threshold for unsecured credit facilities from S$30,000 to S$20,000. A more conservative maximum credit limit of twice the borrower's monthly income will be set for individuals in this S$20,000 to S$30,000 income group, with no access to credit cards.
- To continue to set an aggregate maximum credit limit (inclusive of any credit card limit with respect to financial institutions) for unsecured credit at four times an individual's monthly income for individuals earning at least S$30,000.
Financial institutions and moneylenders are required to conduct adequate and relevant checks on borrowers before lending. Industry players are also encouraged to apply robust risk assessment criteria, closely monitor the performance of loans, and further refine their practices on responsible lending.
MAS will consult the industry on the draft unsecured credit regulations and expects to implement the regulations in 2007.