Letters to Editor
Published Date: 15 October 2005

Response to "Consumer credit too freely available" (Straits Times, 01 Oct 2005)

Dear Editor

I refer to "Consumer credit too freely available" (ST Forum, 1 Oct).

2   To avoid problems associated with easy availability of credit to individuals, the Government has imposed restrictions on financial institutions, in view of their large share in consumer lending.  Banks and other financial institutions regulated by MAS may only lend to individuals with a minimum annual income of $30,000 and subject to a maximum credit limit.   The MAS rules are not imposed on merchants, which may decide to extend credit based on commercial considerations, nor on moneylenders who are not licensed by MAS.  Instead, they are subject to other legislation administered by the Ministry of Law (MinLaw) and the Ministry of Trade and Industry which promote fair and transparent lending practices.

3   Moneylenders like GE Money are governed by the Moneylenders Act regulated by MinLaw, which is intended to help borrowers who may not meet the loan criteria of licensed financial institutions borrow from legitimate moneylenders instead of illegal ones. MinLaw regularly monitors market practices and will consider refinements to the regulatory framework if necessary, to minimise the impact of consumer credit. 

4   Consumers who buy goods on hire-purchase should ensure that they understand all material and relevant information before committing to any purchase. The Hire-Purchase Act lists the minimum information, such as the method of calculating balance upon early settlement, effective interest rate and administrative charges, that the financiers should provide to consumers.

5   In the long run, more restrictive regulations may not be the best solution to Singaporeans getting into unsustainable debt.  The most effective solution to managing consumer debt is for Singaporeans to manage their  finances better, live within their means and take greater responsibility for their own financial well-being. This includes understanding all the salient terms and conditions of obtaining credit and the consequences of getting into too much debt.  To this end, the MoneySENSE national financial education programme runs programmes to help Singaporeans acquire the skills and knowledge to better manage their finances, make prudent investment decisions and plan for their longer-term needs.

Yours sincerely,

Angelina Fernandez
Director (Communications)
Monetary Authority of Singapore

Lim Bee Khim
Deputy Director
Corporate Communications
Ministry of Trade and Industry

Janaine Lau
Assistant Director
Corporate Communications
Ministry of Law