A few days ago, the Monetary Authority of Singapore (MAS) released a consultation paper on proposed changes to credit card and unsecured credit rules.
The changes are aimed at improving financial institutions’ lending and disclosure practices, empowering individuals to make better borrowing decisions, and helping individuals who are at risk of credit problems avoid getting into greater debt.
If you have any comments, you may write in to MAS at policy@mas.gov.sg by 21 January 2013.
The proposed changes are as follows:
- Require FIs to review borrowers’ outstanding debt and credit limits in credit bureau checks.
- Require FIs to conduct credit bureau and income checks for credit limit increases.
- Require FIs to conduct credit bureau checks and request updated income documents when anything that may impinge on the creditworthiness of credit and charge cardholders and borrowers of unsecured credit facilities comes to FIs’ attention.
- Require disclosures on length of repayment period and total amount payable if only the minimum amount is paid and the total amount payable in 6 months if no payment is made.
- Disallow unsolicited offers to increase credit limit and require FIs to obtain borrowers’ consent on the amount of credit limit increase.
- Allow borrowers to indicate their preferred credit limits in application forms for revolving credit facilities and credit limit changes.
- Disallow further amounts to be charged to credit cards, charge cards, and unsecured credit facilities of individuals whose debts with the FI are more than 60 days past due.
- Disallow further amounts to be charged to unsecured credit cards, charge cards and unsecured credit facilities of individuals whose interest bearing balances with the FI are more than 2 months’ income for 6 consecutive months or more.
- Allow individuals above 55 years of age to qualify for credit cards if any one of the following conditions is met –
- (a) Annual income of at least $15,000;
- (b) Net personal assets exceeding $750,000; or (c) Guarantor with annual income of at least $30,000.
- Require credit bureau checks and individual’s written consent to be obtained in a document signed by him before credit cards with credit limit of $500 or less can be issued, and disallow the acceptance of application forms for credit cards with credit limit of $500 or less at temporary locations.
The disallowing of further charges to the card for cards with outstanding balances over 60 days might see the banks protesting against it as this is where they make their money. But having come across a few cases of borrowing spiraling out of control, I feel that overall, these changes are in the right direction.
The full consultation paper can be downloaded from here:
MAS Consultation on Proposed Changes to Credit Card and Unsecured Credit Rules