MAS rules on credit cards & unsecured credit facilities

In order to help individuals avoid accumulating excessive debt, the following MAS rules will take effect from 1 June 2015.

RULE 1.

If your total interest bearing outstanding balance on all credit cards and other unsecured credit facilities with banks and other credit card issuers in Singapore exceed the industry wide borrowing limit for 3 consecutive month, you will generally not be able to :

• charge new amounts to your existing credit cards and/or other unsecured credit facilities with all financial institutions
• obtain credit limit increase on your existing credit cards and/or other unsecured credit facilities will all financial institutions
• obtain new credit cards or other unsecured credit facilities from any financial institutions

The borrowing limit will start at
24 X of your monthly income from 1 June 2015 to 31 May 2017
18 X of monthly income from 1 June 2017
12 X of monthly income from 1 June 2019

RULE 2.

If your unsecured outstanding balances with any financial institution are more than 60 days past due, you will not be able to:

• charge new amounts to your existing credit cards and/or other unsecured credit facilities with that same financial institutions
• obtain credit limit increase on your existing credit cards and/or other unsecured credit facilities will all financial institutions
• obtain new credit cards or other unsecured credit facilities from any financial institutions

This is to prevent debt from spiraling for a borrower who has problems making the minimum payments on his existing debt.

RULE 3.

If you do not pay your unsecured debt in full, you will receive customised disclosures in your monthly bills

• the total amount and time needed to fully pay off your debt if you pay only the minimum payment each month
• the amount of debt that would accumulate by the end of 6 months if you make no payments in the next 6 months

This is to make the costs of borrowing more apparent to borrowers and to show how debt can accumulate if monthly bills are not paid in full.

Credit cards and unsecured credit lines will be suspended by all financial institution if borrower exceed 24 X of their monthly income for 3 consecutive 3 months.

The Government is strengthening the social safeguards to protect higher risk borrowers.

About 1% of total consumer credit is obtained from licensed moneylenders in Singapore.

Although this is a small segment, there is a risk that some borrowers may turn to multiple moneylenders out of desperation. They may take on more debt than they can afford, or be faced with extraordinarily high rates and fees.

The Ministry of Law has thus formed an Advisory Committee on Moneylending to review the moneylending regulatory regime.

Measures being considered include limiting the aggregate amount of loans that a borrower can obtain across multiple moneylenders, restricting the fees charged by moneylenders, and capping the interest rates of loans from moneylenders.