MAS Implements Revised Unsecured Credit Rules for Financial Institutions
Singapore, 25 February 2009...The Monetary Authority of Singapore (MAS) announced today that the revised rules for unsecured credit will be implemented on 1 March 2009. This follows extensive consultation jointly conducted by MAS and the Ministry of Law (MinLaw) with the industry and public in 2006 and 2007, where we received much feedback. MAS and MinLaw carefully considered the feedback so that while we apply a common set of rules for unsecured credit to financial institutions (FIs) regulated by MAS and moneylenders regulated by MinLaw, differences between financial institutions and moneylenders were also recognised.
2 MAS has consistently required FIs to conduct rigorous checks on borrowers before lending and to apply robust risk assessment criteria, as well as closely monitor performance of loans. MAS will introduce the following measures to further mitigate the risks of over-borrowing by individuals from all income groups:
a) FIs will be required to conduct comprehensive checks with the credit bureau before granting each new credit card, charge card or unsecured credit facility, as part of their rigorous credit risk assessment processes.
b) FIs will be restricted from unsolicited offers of unsecured credit facilities to customers, unless a written request is provided by the customers. This follows similar restrictions on unsolicited offers of credit cards already in place.
c) We have set more explicit requirements on disclosure for credit cards and unsecured credit. Disclosure of charges, rates of computation, consequences of late payment and notice to encourage prompt settlement is required for both issuers of credit cards and lenders of unsecured credit facilities.
3 Under the revised rules, the minimum annual income for credit cards remains unchanged at $30,000 for individuals at or below 55 years of age and $15,000 for individuals above 55 years of age. The minimum annual income requirement for unsecured credit facilities will be lowered from $30,000 to $20,000. An aggregate maximum credit limit for all unsecured credit and credit cards across all affiliated entities will be set at four times the borrower’s monthly income for individuals earning at least $30,000. For individuals with an annual income below $30,000, who are therefore not eligible for credit cards, a maximum credit limit of two times the borrower's monthly income will apply.
4 The revised rules aim to update the unsecured credit rules imposed on FIs to address developments within the industry, and to ensure a more consistent regime for granting of unsecured credit in Singapore. The revised rules will allow access to unsecured credit to more individuals who may have occasional genuine borrowing needs. The changes attempt to maintain a balance between allowing responsible borrowing and the Government's social policy of discouraging individuals from spending beyond their means. Lenders and borrowers both have a role to play in ensuring that use of unsecured credit and credit cards is responsible, sustainable and within the means of the borrower. MoneySENSE, a national financial education programme, will continue to work with industry associations to implement initiatives to educate consumers on the importance of budgeting and prudent credit management.