FAQs on Changes to Credit Card and Unsecured Credit Rules
1. What is this rule change all about?
(From MAS) 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 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. 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 will not be allowed to grant further unsecured credit to individuals whose
unsecured debts with those financial institutions are 60 days or more 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.
2. When will these rules take effect?
The proposals will be implemented in stages with some taking effect as soon as the revised rules are issued
and others expected to come into effect over time to provide borrowers and financial institutions time to
adjust.
From Dec 1, 2013
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Conduct credit bureau and income checks before increasing credit limits
Conduct credit bureau and income checks when they receive information placing the creditworthiness of their borrowers in doubt
Allowed to grant credit cards to those above 55
Rules about solicitation and credit bureau checks to be extended to credit cards with credit limits of
$500 or less
From June 1, 2014
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Review borrowers’ outstanding debt and credit limits through credit bureau checks
Get consent from borrowers in writing on the amount of credit limit increase
Require borrowers to indicate their preferred credit limits when applying for credit facilities
From June 1, 2015
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Disclose to borrowers the total amount and time needed to fully pay off their debts if they pay only
the minimum amount each time, and the amount of debt that would accumulate by the end of six
months if they don’t make any in the period
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Disallowed from granting further unsecured credit to individuals whose debts from any credit card
or unsecured credit facility with the bank are more than 60 days past due
Disallowed from granting further unsecured credit to those whose total outstanding unsecured debt
across all banks exceeds 12 months of their income, for 90 days or more
Can exceed regulatory credit limits to refinance debt that a borrower transfers from another ban
3. How will this impact to me as a consumer?
A.
Your credit bureau report will be enhanced to show aggregated loan outstanding balance and total
credit limit from June 2014 onwards. The bank will be utilising the additional information for credit
assessment. For more information on your credit bureau report, you may contact CBS directly.
B.
From June 2014 onwards, you are required to indicate a preferred credit limit when you apply for
unsecured credit facility from the bank or request for a credit limit review.
C.
Your unsecured products (e.g. credit card, personal line of credit, etc) usage may be suspended by
June 2015 when your unsecured interest bearing outstanding balance is above 12x of your monthly
income for 90 days or more, or in the situation when your unsecured products are 60 days or more past
due with any FIs. The 12x rule is applicable for consumers with annual income of less than S$120k only.
You may request the bank to reinstate your unsecured products by providing fresh income documents
and after you bring your unsecured interest bearing balance below 12x and clear your overdue balance
with all FIs. However the request is still subject to the bank’s review.
D.
From now to June 2015, the bank may contact you to work on reducing your outstanding balance or
request for an update of your income so that your usage on unsecured products may not be impacted
by June 2015.
E.
From June 2015, if you are not paying your prior month’s credit cards and unsecured credit facilities in
full, the bank will disclose the below information in your monthly credit card and unsecured loan facilities
statement:
a.
b.
The total amount and time needed to fully pay off your debts if you pay only the minimum
payment each month; and
The amount of debt that would accumulate by the end of 6 months if you make no
payments in the next 6 months.
4. How will I benefit out of these changes?
This will help consumers who have difficulties repaying their existing debt, and avoid getting into further debt
problems.
5. How can the bank help me with my debt problem?
A.
Update us with your latest income document. You may be eligible for higher credit limit if your latest
income is higher. With a higher limit, your balance to income (BTI) ratio may be reduced and therefore
your usage may not be impacted by the 12x BTI rule by June 2015; or you can be excluded from the
12x BTI rule when your annual income is S$120k or more.
B.
If your overall unsecured interest balance is between 12x and 16x of your income as at 30 November
2013 based on CBS information, the bank may grant you a transition period till 31 May 2017 to bring
down your debt to below 12x. If your overall unsecured interest balance is above 16x of your income as
at 30 November 2013 based on CBS information, the bank may grant you a transition period till 31 May
2019 to bring down your debt to below 12x. During this transition period, your credit card usage may not
be blocked, however, you will need to work out a repayment plan with the bank to reduce your balances.
C.
The bank offers debt consolidation program whereby you can apply to the bank so as to work out a plan
to consolidate your debt with all the rest of the banks to reduce your debt burdens.
6. How is the 12x calculated?
For example, if you are earning $4,000 a month and have a credit card and similar debt worth over $48,000
for 90 days or more, you will not be able to charge more to your existing unsecured credit facilities or borrow
further from any bank. The income information is based on the latest copy of income documents that you
have submitted to the bank. The bank may have its own rules for calculating annual income.
7. How does the bank consider ‘interest bearing’ balance?
Interest bearing balance as per MAS guidelines refers to any balance that attracts charges or interest that
results in EIR (effective interest rate) being more than zero. This includes unbilled installment loans where
the EIR is not zero. This is applicable to unsecured products like credit cards, personal loans, personal line
of credit, etc.
8. Does this 12x rule impact me if I earn more than S$120k annually?
You are exempted from the 12x rule.
9. Can a bank increase my credit limit without my knowledge? Can I indicate my preferred
credit limit?
No. From 1 June 2014, financial institutions will be required to obtain your express consent for the amount of
each credit limit increase. This will ensure that credit limit increases are not extended unless you agree to
such increase.
10. I have just turned 55 years old. Do I qualify to apply for a credit card?
Yes, you qualify to apply subject to you meeting the bank's eligibility criteria, including, having an annual
income of at least $15,000.
11. Does the new rule affect my Renovation and/or Education Loan?
Renovation and Education Loan’s outstanding and repayment behavior will be reflected in the enhanced
CBS Report. However, these loans are defined as “Excluded Loan” by MAS thus they are exempted from
the new rule. Financial institutions may however leverage on information found on CBS to evaluate loan
application for prudent lending.
12. Does the new rule affect the rest of my Secured Loans?
Other than uploading of outstanding and repayment behavior to CBS, the new rule does not affect the
processing of the Secured Loans. Financial institutions may however leverage on information found on CBS
to evaluate loan application for prudent lending. This also works vice versa.
13. Where can I find more information about these changes?
“Credit Card and Unsecured Credit Rules Strengthened to Help Individuals Avoid Getting Into Debt
Problems.”
http://www.mas.gov.sg/News-and-Publications/Press-Releases/2013/Credit-Card-andUnsecured-Credit-Rules.aspx
You may also refer to:
ABS FAQs at: http://www.abs.org.sg/financial_faq_cc.php
MAS FAQs at: http://www.mas.gov.sg/faqs.aspx]