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The Straits Times
www.straitstimes.com
Published on Dec 27, 2012
PROPOSED TOUGHER RULES ON CREDIT CARDS A TIMELY MOVE
More seeking help over card debts: Credit counselling agency


MONETARY Authority of Singapore (MAS) statistics show that there has been an increase of almost one million principal credit cards for this year.

There are now 9.2 million principal and supplementary credit cards for 1.45 million individual accounts.

Rollover debt has been increasing faster than billings on credit cards.

It is possible that at year end, we will hit a new milestone of $5 billion in rollover debt, which attracts interest of 24 per cent per annum.

The amounts written off have also been climbing, and the write-off rate for the last quarter was 5.1 per cent, compared with 4 per cent for the fourth quarter of last year.

Credit Counselling Singapore has experienced an almost 50 per cent increase in the number of debt distressed individuals asking for assistance this year.

These figures suggest that more individuals are finding difficulties in making payment.

The proposals by the MAS are therefore both timely and necessary ("MAS wants tougher rules on credit cards"; last Saturday).

For the first time, credit reports will include the total unsecured facilities available as well as total utilisation, revealing the actual extent of a person's indebtedness.

Poor payment behaviour at one financial institution will now be red flagged to other institutions.

Previously, other financial institutions were only made aware upon making a credit check.

The ability of individuals to build up large rollover debts will be curtailed by placing a trigger of two months' credit utilisation over six months.

An interesting proposal is that financial institutions will be required to consider information provided by family members.

This will address the situation faced by many family members, whose communication with the institutions have been hitherto ignored.

However, this will only affect existing relationships and will not stop the debtor from incurring new debts with other financial institutions.

The MAS has sent a strong signal that individuals will not be allowed to roll over credit card debts for a prolonged period of time.

The proposals are now more proactive in detecting and reporting delinquent behaviour, the build-up of credit card debts and making other financial institutions aware of a payment problem at any of them.

In the short run, many thousands of individuals who have been using their unsecured facilities extensively will be affected as they will be unable to continue rolling over their debts.

They will face difficulties when financial institutions freeze these lines and ask for repayment.

But it is far better for such individuals to bite the bullet and seek a solution.

The financial institutions should be sympathetic and arrange affordable payment terms for them.

Kuo How Nam

President

Credit Counselling Singapore