Reply to Parliamentary Question on Credit Card Debt
QUESTION NO 616
NOTICE PAPER 351 OF 2013
FOR WRITTEN ANSWER
Date: For Parliament Sitting on 16 SEPTEMBER 2013
Name and Constituency of Member of Parliament
Ms Mary Liew, NMP
To ask the Prime Minister (a) what is the current number of Singaporeans below the age of 35 years seeking help for credit card debts; and (b) whether there are preventive measures being enforced to protect Singaporeans from falling into the spiral of credit card debts.
Answer by Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in charge of MAS:
1 The average age of individuals seeking help from Credit Counselling Singapore (CCS)1, mostly for credit card debt, is 40 years. In the first half of 2013, about 31% (250) of those who sought help from CCS were 35 years old and younger. Based on data from Credit Bureau Singapore (CBS), the majority of credit cardholders who are past due or who have defaulted on their credit card loans are in their 30s and 40s.
2 Overall, credit card debt distress levels do not differ significantly across age groups. In fact, across all age groups, credit card default rates are consistently low, at below 0.2%.
3 But low default rates should not lull us into complacency. We should reduce the risk of people borrowing beyond their means. To ensure that those who use credit cards have sufficient financial means to service their debts, MAS has imposed minimum income eligibility criteria for the issue of credit cards. Individuals who are 55 years old and below must have an annual income of at least $30,000 before they can qualify for credit cards; those above 55 years of age must have an annual income of at least $15,000. In addition, MAS has a limit of up to four months’ income on the total amount of unsecured credit that can be extended to any credit cardholder. Credit card issuers are also required to conduct comprehensive credit bureau checks on an individual’s credit history before issuing new credit cards.
4 To further promote the prudent use of unsecured credit, MAS announced on 11 September new measures targeted at those who are at greatest risk of debt problems. A key change is the introduction of an industry-wide aggregate cap on individuals’ unsecured borrowings. With this cap, financial institutions will not be allowed to grant further credit to individuals whose aggregate unsecured borrowings across all financial institutions exceed 12 months of their income for 90 days or more. This cap is designed to discourage individuals from prolonged reliance on credit cards and unsecured credit. MAS has set the limit at 12 months’ income, for a start, and will adjust the limit if necessary to further encourage financial prudence. Aside from this, financial institutions will not be allowed to grant further credit to individuals whose debts with a financial institution are more than 60 days past due. These recent policy changes complement MAS’ existing credit card rules in preventing debt from spiralling out of hand for individuals across all age groups.
5 Ultimately, while MAS has rules in place to help Singaporeans avoid accumulating excessive debt, Singaporeans have to take personal responsibility for their finances. They have to exercise prudence when deciding whether to sign up for a credit card, understand their ability to repay the debt incurred when they use the card and ensure that they do not incur excessive debt. The MoneySENSE national financial education programme has collaborated with the media, the industry and consumer organisations to educate consumers on factors to consider before taking on debt and the consequences of late payments. MAS hopes that these efforts will help Singaporeans manage their finances proactively, use credit responsibly, and prevent overdependence on credit.
1 Credit Counselling Singapore is a charity set up to help individuals recover from serious debt problems.