Response to "Some banks worsen defaulter's debt woes" - The Straits Times, 3 November 2014
7 November 2014
The Editor ST Forum
The Monetary Authority of Singapore (MAS) agrees with Mr Sohindar M. Singh that individuals who already have difficulties repaying their existing credit card debt should be helped to avoid getting into further debt problems. (“Some banks worsen defaulter's debt woes”, ST Forum, 3 November 2014).
We empathise with the situation faced by his colleague, and would like to assure Mr Singh that MAS has in place measures to help everyone make well-informed credit decisions and to avoid accumulating excessive unsecured debts.
Financial institutions (FIs) must conduct credit bureau and income checks before granting a new credit card or unsecured credit facility, or increasing the credit limits on such facilities. They must also obtain a borrower’s express consent for each credit limit increase.
From June next year, FIs will not be allowed to grant any credit to an individual if he is 60 days or more past due on any credit card or unsecured credit facility, or his outstanding unsecured debt aggregated across all FIs exceeds his annual income. In addition, FIs must also disclose to individuals who roll over their debts, the cost of doing so and how it will cause their debts to accumulate.
These new measures do not require individuals to make immediate repayments on their outstanding debts. However, MAS expects FIs to reach out actively to borrowers who have accumulated high levels of debts to work out reasonable repayment plans to reduce their debt burdens. Borrowers are also encouraged to approach their FIs early to update their income records and to discuss possible repayment plans.
We thank Mr Singh for the opportunity to raise awareness of these measures to help borrowers avoid accumulating excessive unsecured debts. MoneySENSE, the national financial education programme, will continue to run initiatives to educate consumers on the responsible use of credit.
Bey Mui Leng Director (Communications) Monetary Authority of Singapore