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Source: www.mas.gov.sg |
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MAS and MinLaw Issue
Responses to Feedback on Proposed Changes to Unsecured Credit
Rules |
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The Monetary Authority of Singapore (MAS)
and the Ministry of Law (MinLaw) have jointly issued their responses to
feedback received from a public consultation on the proposed changes to
the unsecured credit rules and the proposed application of these rules
to moneylenders. |
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The joint public consultation was conducted
from 7 August 2006 to 7 Sept 2006. |
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The proposed changes aim to update the
unsecured credit rules imposed on financial institutions to address
developments within the industry and to extend the unsecured credit
rules to moneylenders in line with the Government's social policy of
discouraging individuals from spending beyond their means. |
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Notwithstanding this, the new rules do not
seek to deny individuals who may have occasional genuine borrowing needs
from all access to unsecured credit. |
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The changes attempt to maintain a balance
between allowing responsible borrowing and the Government's social
policy of discouraging individuals from spending beyond their means. |
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The wide range of feedback that MAS and MinLaw
received on the proposed changes reflects the challenges of maintaining this
balance. |
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Some respondents agreed with the proposals. Some
suggested further liberalisation, while others raised concerns such as the
possible aggressive selling by banks and over-borrowing by consumers leading to
increased delinquency and bankruptcy. |
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After careful consideration of views from
all respondents, MAS and MinLaw have decided on the following policy
changes, which are carefully calibrated to balance the twin objectives: |
- A measured step of lowering the minimum annual
income threshold for unsecured credit facilities from $30,000 to $20,000. A
more conservative maximum credit limit of twice the borrower's monthly income
will be set for individuals in this $20,000 to $30,000 income group, with no
access to credit cards.
- To continue to set an aggregate maximum credit
limit (inclusive of any credit card limit with respect to financial
institutions) for unsecured credit at four times an individual's monthly
income for individuals earning at least $30,000.
- Create appropriate modifications to the
moneylenders regime. For instance, for unsecured loans of $3,000 and below,
no minimum income requirement would be imposed but such loans would be subject
to an interest rate cap.
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In order to mitigate the risks of
over-borrowing by individuals from all income groups, MAS and
MinLaw require financial institutions and moneylenders to conduct
adequate and relevant checks on borrowers before lending. |
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Industry players are also encouraged
to apply robust risk assessment criteria, closely monitor
performance of loans, and further refine their practices on
responsible lending. |
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MoneySENSE, a national financial
education programme, will continue to work with industry
associations, such as the Association of Banks in Singapore, to
implement initiatives to educate consumers on the importance of
budgeting and prudent credit management. |
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MAS and MinLaw will make the relevant
legislative changes to the Unsecured Credit Regulations and the
Moneylenders Rules respectively by mid-2007. The responses of MAS
and MinLaw to the feedback received can be viewed online at the
Reach Portal at:
http://app.reach.gov.sg. |
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Source: www.mas.gov.sg
Press Release 1 Feb 2007 |
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FrontPage Edition: Thu 1 February 2007
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