Reply to Parliamentary Question on Credit Card Debt
QUESTION NO 259
NOTICE PAPER 150 OF 2015
FOR WRITTEN ANSWER
Date: For Parliament Sitting on 13 July 2015
Name and Constituency of Member of Parliament
Mr Christopher De Souza, MP for Holland-Bukit Timah GRC
To ask the Prime Minister (a) what is the number of individuals who have been declared bankrupt, whether voluntary or otherwise, as a result of credit card debt in the last three years; and (b) whether these figures suggest a need to introduce measures that make credit cards less accessible or to lower credit limits.
Answer by Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister in charge of MAS:
1 According to the Insolvency & Public Trustee’s Office, 1,760 individuals became bankrupt last year, compared to 2,000 and 1,750 individuals in 2013 and 2012 respectively. Among those who became bankrupt, 41% cited excessive use of credit as the cause, slightly down from 46% in 2009. The types of credit include not only credit cards, but also business loans and hire-purchase spending on cars.
2 While the number of individuals made bankrupt as a result of credit card debt is not very large, Mr De Souza has raised a valid concern about the dangers of excessive borrowing.
3 MAS has put in place various measures in recent years to encourage prudent borrowing. These include the Total Debt Servicing Ratio framework for housing loans, to ensure that individuals purchasing property do not borrow beyond their means. MAS also imposes loan-to-value and loan tenure limits on housing and motor vehicle loans extended by financial institutions to encourage financial prudence.
4 For credit cards, only individuals with annual incomes of $30,000 or more can qualify for credit cards. The amount of credit that each financial institution can extend via unsecured credit facilities is limited to four times the monthly income of the borrower. These are long-standing safeguards.
5 Further, last month, a limit to how much an individual can borrow from all financial institutions came into effect. It caps the total outstanding unsecured credit that a borrower can obtain from all financial institutions. The borrowing limit has been set at an initial level of 24 times the borrower’s monthly income, and will be lowered progressively to 18 times from 1 June 2017 and 12 times from 1 June 2019.
6 For unsecured borrowers who have already accumulated significant unsecured debts before June, the banking industry, together with Credit Counselling Singapore (CCS), launched a new debt repayment solution in April this year, known as the Repayment Assistance Scheme, to help them repay their debts over time. The application window for the scheme closes at the end of this year, so I urge eligible borrowers to apply soon if they find it suitable. Borrowers who are unsure can contact CCS to find out more about the scheme and other repayment solutions that are available.
7 MAS will also continue to work with MoneySENSE - a national financial education programme - to raise public awareness on debt management.