Tougher rules for credit cards and unsecured loans

Tougher rules for credit cards and unsecured loans

From June 2015, borrowers whose unsecured debts are more than 60 days past due will no longer be allowed to obtain further unsecured credit until all their overdue debts are paid. They will also not be allowed to obtain new credit cards or unsecured loans, or higher credit limits, from other financial institutions.


Get the full story from The Straits Times.

Read the full statement from MAS here:

The Monetary Authority of Singapore (MAS) has finalised changes to credit card and unsecured credit rules aimed at improving lending practices by financial institutions and enabling individuals to make better borrowing decisions.

The policy changes follow a public consultation, in which respondents generally supported the proposals. MAS has taken the public feedback into consideration and adjusted the proposals where appropriate. Details are set out in the responses to feedback received on the consultation paper.

The key policy changes are as follows:

(a) Financial institutions will be required to review a borrower's total debt and credit limits before granting a new credit card or unsecured credit facility, or increasing the credit limit on such facilities. This is to enable a more realistic assessment of an individual's borrowing capacity.

(b) Financial institutions will 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. This will help borrowers make more informed credit decisions, taking into account the total cost of borrowing.

(c) Financial institutions will be required to obtain a borrower's express consent for the amount of each credit limit increase. This will ensure that credit limit increases are not extended to borrowers unless they agree to such increases.

(d) Financial institutions 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 also not be allowed to grant new cards and unsecured credit facilities or increase credit limits on existing facilities. This will help individuals who already have difficulties repaying their existing debt avoid getting into further debt problems.

(e) Financial institutions will not be allowed to grant further unsecured credit to individuals whose aggregate interest-bearing outstanding unsecured borrowings across all financial institutions exceed 12 months of their income for 90 days or more. This includes not being able to charge further amounts to all existing unsecured cards and unsecured credit facilities. Financial institutions will also not be allowed to grant new unsecured cards and unsecured credit facilities. This will help individuals who have already accumulated high levels of debt through credit cards and unsecured credit avoid accumulating further debt.

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