Reply to PQ on Guidelines for Credit Card Issuers
Question No. 116
Notice Paper No. 201 of 2010
For Written Answer
Date: For Parliament Sitting on 18 October 2010
Name and Constituency of Member of Parliament
Assoc Prof Fatimah Lateef, Member of Parliament, Marine Parade GRC
To ask the Senior Minister (a) whether there are guidelines for banks and credit card companies to adhere to in inviting customers to apply for credit cards/packages and, if so, which agency oversees the enforcement of these guidelines; and (b) why are individuals with bad credit history, multiple credit card debts and arrears still receiving personalised letters and advertisements inviting them to invest and apply for more credit cards/packages.
Mr Lim Hng Kiang, Minister for Trade and Industry and Deputy Chairman:
Assoc Prof Lateef asked whether there are guidelines for card issuers in relation to inviting customers to apply for credit cards, and which agency oversees the enforcement of these rules.
2 Card issuers in Singapore have to adhere to regulations in the Banking Act which is administered by the Monetary Authority of Singapore (MAS). While the Regulations do not prohibit card issuers from inviting customers to apply for credit or charge cards, card issuers must check that the applicants satisfy the minimum annual income requirement and other regulatory requirements, as well as the card issuers’ internal credit risk criteria before approving the application. In addition, card issuers are not allowed to send or give credit or charge cards to someone unless the person has requested for it in a document that has been signed. These rules seek to ensure that customers have to take the additional step of applying for a credit or charge card before being issued one.
3 There are a few exceptions to this and they apply to the sending of “replacement cards”, “additional cards” and “substitute cards”. These are situations where the consumer is an existing cardholder of the card issuer. In the case of a replacement card, the cardholder is expecting the issuance of the card – for example where the card is issued as a replacement for a lost card, or when the card is about to expire. For additional cards, an example would be where a bank wishes to upgrade the card of an existing cardholder. Substitute cards are cards issued for the sole purpose of enhancing security features of existing cards.
4 Assoc Prof Lateef has also asked about the marketing of credit cards to individuals with bad credit history or who are in credit card debt. Banks may only access information about a person's credit-worthiness with a credit bureau when that person applies for a credit facility with the bank. Access for any other purposes, such as for the marketing of credit cards, is prohibited in order to protect the individual's privacy. Through the mandatory credit bureau check, a card issuer can be informed of the number of credit lines that the applicant already has with other financial institutions and the applicant's repayment record for these facilities. This supplements the rigorous credit assessments that financial institutions are expected to conduct before they grant credit to customers.
5 Apart from credit bureau checks, we have several other measures in place to implement the Government’s social policy of discouraging Singaporeans and permanent residents from spending beyond their means. To ensure that individuals holding credit cards have sufficient financial means to handle these spending instruments, we have set the minimum annual income threshold at $30,000 for a credit card. We have also limited the amount of credit that an individual can obtain from a financial institution and its affiliated entities. An individual, whose annual income exceeds $30,000, can obtain credit of up four times his monthly income.
6 These measures are in place to regulate the amount of credit that financial institutions grant to consumers, thereby mitigating the risk of over-borrowing by individuals from all income groups. At the same time, consumers also have a role to play in ensuring that they use credit responsibly, and within their means. They need to exercise prudence when deciding whether to sign up for a credit card, carefully assess their repayment ability and ensure that they do not incur excessive debt. The national financial education programme, MoneySENSE, continues to work with partners such as the Association of Banks in Singapore (ABS) and the media to educate consumers on the responsible use of credit facilities and the factors consumers should consider before taking on debt.