Singapore's central bank tightens credit card and unsecured credit rules
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E-mail Xinhua, September 11, 2013
The Monetary Authority of Singapore (MAS), the city-state's central bank, announced on Wednesday some tightened rules for credit card and unsecured credit, effective step by step from Dec. 1 this year.
The MAS said the measures are aiming at improving lending practices by financial institutions and enabling individuals to make better borrowing decisions, as well as avoid getting into debt problems.
According to the key policy changes, financial institutions will be required to review a borrower's total debt and credit limit before granting a new credit card or unsecured credit facility, or increasing the credit limit on such facilities.
The central bank said it is to enable a more realistic assessment of an individual's borrowing capacity.
In order to help borrowers make more informed credit decisions, the financial institution will be required to "disclose to individuals who roll over their credit card debts and revolving credit facilities the potential cost of doing so and how the debt will accumulate."
Financial institutions will also be required to obtain a borrower's express consent for the amount of each credit limit increase.
Besides, the MAS said financial institutions will not be allowed to grant further unsecured credit to individuals whose unsecured debts with those financial institutions are more than 60 days past due, until all past due amounts are paid. Other financial institutions will not be allowed to either.
"This will help individuals who already have difficulties repaying their existing debt avoid getting into further debt problems," the MAS said.
If individuals' aggregate interest-bearing outstanding unsecured borrowings across all financial institutions exceed 12 months of their income for 90 days or more, they will not get any further unsecured credit from any financial institutions either.
The central bank said it will "help individuals who have already accumulated high levels of debt through credit cards and unsecured credit avoid accumulating further debt."
MAS added that borrowers will have a transition period of 18 months to re-evaluate and pay down their existing borrowings to stay within the aggregate limit on credit card and unsecured borrowings. Endi
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