<Pic Credit: OnSingapore>
Credit card debt freeze to be phased in
According to the Straits Times article “Tighter limits on credit card debt to be phased in” (Apr 7) – “Data from financial institutions and Credit Bureau Singapore shows that as of February, 32,000 borrowers had total interest-charging unsecured debts above 24 times their monthly income.
They make up 2 per cent of the total unsecured-credit borrowers, and their borrowings pose no risk to the stability of the banking industry here. The total non-performing loan ratio for financial institutions is low at 1.1 per cent as of December last year.
Including them, people with total interest-charging unsecured debts of more than 12 times their monthly income made up about 84,000, or 5 per cent, of unsecured borrowers.”
From 50,000 to 84,000 owing more than 12 months’ income?
Just about 5 months ago – it was said that “MAS estimates that about 3 per cent of unsecured credit borrowers have accumulated unsecured debts that exceed their annual incomes”.
So, how come the 3 per cent estimate in October has now ballooned to 5 per cent, from 50,000 to 84,000?
Since 5 per cent owe more than 12 months – how many owe more than 6 months, 3 months, etc?
300,000 people financially stressed?
With 84,000 and more owing so much unsecured debt – does it mean that 336,000 or more people may be affected, if we assume about 3 family members per debtor?
In this connection, according to a Credit Bureau Singapore (CBS) report in April last year – “14.64 per cent of consumers missed at least one payment on their credit card accounts last year, up from 13.54 per cent in 2012. The figure was 12.55 per cent in 2011.”
As I believe that there may be about 2 million credit card holders, out of the 8.1 million main cards and 1.6 million supplementary cards in Singapore
300,000 people can’t pay?
- does it mean that about 300,000 people did not or could not pay even a single cent on their outstanding credit card balance, for at least one month?
Isn’t this a very alarmingly large number of people?
25% interest plus penalty fees?
Moreover, when you miss a month or more on your credit card balance – you get charged typically about 25% interest a year (recently increased from 24%) plus a penalty charge of say $50 every month.
Since affected debtors “can no longer pay recurring charges on their credit cards” or use of any credit – many may be severely stressed because of the immediate strain on their cashflows.
153rd Press Freedom ranking media reporting?
Don’t you find it rather bias that everyone interviewed said the debtors were imprudent and spent on lifestyle?
I have a friend who after incurring a large medical bill due to his child’s illness, huge cut in pay and 3 children going to university – has been in debt since for many years – and will be seriously affected now.
46% due to job woes
In this connection, according to a news report on 29 October – “job woes. People who have been retrenched or suffered a pay cut made up 46 per cent of debtors at CCS
22% due to business troubles
business operators who ran into trouble. They used unsecured credit such as credit cards to get themselves back on track – but only wound up with more money woes. CCS said 22 per cent blame business troubles for debt.
22% due to medical bills
Another big headache: unexpected medical bills – either for the debtor themselves or someone they know, with 22 per cent citing this factor”.
Turn to licensed moneylenders or loan sharks?
As to “A few overstretched borrowers might turn to licensed moneylenders or even loan sharks in response to tighter limits on credit card and other unsecured debt, financial advisers warn” – why do we still allow such debtors to borrow some more from licensed moneylenders?
“Licensed moneylenders” is not “unsecured credit”?
Shouln’t such lending be frozen too in addition to other “unsecured credit” like credit cards and credit lnes? Isn’t licensed moneylenders “unsecured credit” also?
New repayment assistance scheme
As to “The ABS, leading retail banks and card issuers yesterday announced a repayment assistance scheme, set up to help borrowers reduce their unsecured debts over time. The scheme lets those with debt exceeding 12 months of their monthly income pay it down at a lower interest rate of 5 per cent a year and over eight years. The CCS will coordinate the scheme.
So many criteria to be eligible?
ABS director Ong-Ang Ai Boon urged “highly indebted borrowers” to take up the repayment assistance scheme, and said borrowers have to apply for it by Dec 31″ – why is there a Dec31 deadline?
What about debtors in the future? Will every affected debtor be notified to avail themselves of this scheme? Why is it available to only those who owe more than 12 months?
As to “Eligible borrowers need to be Singaporeans or permanent residents earning under $120,000 a year and prompt in making monthly unsecured loan repayments”- I wonder what proportion of such debtors have been “prompt in making monthly unsecured loan repayments”?
Your guess is as good as mine – very few?
Does “prompt” mean never missing a payment in part or in full, or a delayed one?
Record $5,5b rollover balance?
It is alarming that according to the Ministry of Finance’s statistics – Rollover Balances have increased by about 8%, from $5.1 to $5.5 billion in the 12 months to April 2014.
Every debt measure is bad?
Singapore is ranked third in the world after Japan and Ireland for debt owed by households, nonfinance corporations and government – at 382 per cent debt-to-GDP ratio.
Singapore’s household debt-to-GDP ratio at 73 per cent in 2013 is also one of the highest in the world.
Singapore’s corporate debt-to-GDP ratio at 78 per cent (Q2 2014) is also one of the highest in the world.
Singapore’s public debt-to-GDP ratio at 105.5 per cent (2013 estimate) is amongst the top ten countries in the world.
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TRS Contributor