Proposed Changes to Unsecured Credit Rules Similar Rules to Apply to Moneylenders
Singapore, 7 August 2006...MAS and the Ministry of Law have jointly released a consultation paper entitled: 'Joint Public Consultation Paper on Unsecured Credit Rules'.
2 Currently, financial institutions granting unsecured credit facilities or issuing unsecured credit cards to individuals are required by MAS to abide by a set of unsecured credit rulesFinancial institutions granting unsecured credit facilities or issuing credit cards to individuals are currently required to ensure that these individuals have a minimum annual income of at least $30,000. The maximum unsecured credit that can be granted to an individual in the form of an unsecured credit card is twice his monthly income, with an additional and separate limit of the same amount in the form of other unsecured credit facilities.. These rules were put in place to implement the Government's social policy of discouraging individuals from spending beyond their means by curbing the easy access to credit through financial institutions.
3 The moneylenders regime, which is supervised by the Ministry of Law, does not have similar unsecured credit rules applying to both licensed moneylenders and exempted moneylenders that grant unsecured personal loans to the public.
4 The key recommendations in the Consultation Paper include:
To lower the minimum income threshold for unsecured credit facilities to $20,000 from $30,000. The minimum income requirement for credit cards remainsat$30,000.
To set the maximum aggregate credit limit of all unsecured personal credit facilities and credit cards granted by a financial institution at four times monthly income for individuals with at least $30,000 in annual income. For individuals with annual income of at least $20,000 and below $30,000, the maximum aggregate credit limit will be twice their monthly income.
To apply the unsecured credit rules proposed by MAS to the moneylenders regime with appropriate modifications. For instance, under the moneylenders regime, for unsecured loans exceeding $3,000, income checks are mandatory and applicants must have an annual income of at least $20,000. For unsecured loans of $3,000 and below, mandatory income checks are not required as no minimum income requirement would be imposed.
5 The proposals in the Consultation Paper do not signal a relaxation in the Government's policy stance towards unsecured credit. They are intended to update MAS' existing unsecured credit rules given the developments in the financial industry, especially in the area of risk management, and to introduce appropriate unsecured credit rules into the moneylenders regime. The common application of such rules to both financial institutions and moneylenders will ensure a more consistent regime for granting of unsecured credit in Singapore.
6 MAS and the Ministry of Law invite interested parties to give their views and comments on the proposals contained in the Consultation Paper.(Click here to view the consultation paper.) The Consultation Paper can be viewed online at the Government Consultation Portal at: http://app.feedback.gov.sg/asp/ocp/ocp01d1.asp?id=346
7 The consultation period will end on 7 September 2006.