Q298: To ask the Senior Minister in respect of credit card companies, (a) what are the measures to (i) curb over-aggressive marketing campaigns (ii) regulate the ready availability of easy credit (iii) curb the aggressive tactics employed by their debt collectors; and (b) whether there are any reviews of the current insolvency practices to include mandated intermediation as part of the legal process before bankruptcy.
Mr Tharman Shanmugaratnam, Minister for Education and Deputy Chairman:
1. The Government has instituted several rules to curb the easy availability of credit. Under MAS' requirements, credit card issuers are only allowed to issue unsecured credit cards to individuals with an annual income of $30,000 or more. The maximum credit extended is capped at twice the individual's monthly income. Except for existing credit card customers, card issuers are not allowed to send credit cards to persons who have not requested for them in writing. They are also not allowed to receive applications for credit cards at temporary sales booths.
2. MAS expects banks to perform due diligence and assess the track record, reputation and capability of external debt collecting agencies that they intend to engage. Banks must oversee and be responsible for the debt collecting work contracted out to these agencies, including managing the risks arising from tactics employed by the agencies.
3. The Insolvency & Public Trustee's Office has been carrying out pre-bankruptcy mediation since 2002 though its Pre-bankruptcy Advisory and Mediation Centre (PAM) so as to help debtors avoid bankruptcy. Officers from the Centre help to explain the bankruptcy procedures and provide advice on alternatives to bankruptcy to debtors. Trained mediators also facilitate mediation sessions between creditors and debtors to assist them to reach an amicable settlement and thereby avoid bankruptcy. This year, almost 1700 individuals approached the Centre for assistance.
4. To advise borrowers with serious debt problems, Credit Counselling Singapore (CCS), a non-profit organization, was launched in October 2004. CCS counsels them and where applicable, helps them to work out a debt repayment plan.
5. So there are credit counselling schemes in place. MoneySENSE, the national financial education programme, is also stepping up its education programmes. Ultimately the key to debt problems is for consumers to take personal responsibility for managing their finances and to plan for the long term.