http://www.straitstimes.com/archive/...nders-20130913

NEW CREDIT RESTRICTIONS

Loan curbs may cover moneylenders

Law Ministry overseeing them is working to align its rules with MAS'

Published on Sep 13, 2013

By Mok Fei Fei


MONEYLENDERS may soon face restrictions on giving out unsecured loans in line with the tough new rules for financial institutions that were unveiled on Wednesday.

In a bid to rein in high levels of credit card debt and other unsecured loans, the Monetary Authority of Singapore (MAS) had set new limits on borrowing.

For instance, people whose unsecured debts total more than 12 months of their income for 90 days or more will be barred from getting more credit, from June 2015 onwards. Unsecured loans are those not backed by assets, such as a car or home.

But moneylenders are not covered by MAS rules, as they come under the purview of the Ministry of Law. In an e-mail reply to The Straits Times' queries, the ministry said yesterday the new MAS loan rules do not apply to licensed moneylenders, but it is working closely with MAS to fix this.

"We are working on aligning our position to complement MAS' 12 months' income limit on unsecured borrowings from financial institutions, and to help ensure that borrowers do not overextend themselves in credit," it said.

Still, unsecured loans granted by moneylenders are not a significant part of overall debt here.

The Law Ministry said that as of last December, total outstanding unsecured debt owed to moneylenders was less than 3 per cent of that granted by financial institutions. "This suggests that currently, only a small proportion of borrowers turn to moneylenders."

But Mr Kuo How Nam, president of non-profit group Credit Counselling Singapore, said a potential problem is that some heavy borrowers might now turn to moneylenders. So a change to rules on moneylenders is vital.

Moneylenders now face some limits. The most they may lend is four months' income if a borrower's annual pay is $30,000 to $120,000, and two months' income if annual pay is $20,000 to $30,000. For those earning less than $20,000, the limit is $3,000.

About 200 moneylenders were licensed in Singapore as of Sept 1.

Industry players say the MAS changes have thrown light on the difficulty of knowing how bad a borrower's total debt is, until it is too late.

Banks now have no access to a centralised database on the borrower's overall debt to different banks unless there is a default. The Straits Times understands that this is to protect the borrower's confidential information.

Under the new rules, banks will be able to see each borrower's total debt.

Credit Bureau Singapore (CBS) data on financial institutions shows that average unsecured debt exposure has risen over the years.

The average principal sum per consumer went up from $8,887 in 2008 to $12,678 this year, while the percentage of credit cardholders with credit card delinquency also crept up from 4.7 per cent last year to 4.9 per cent this year.

As of July, CBS data showed there were 1,407,946 credit cardholders here.

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