response to feedback received public ......credit card and unsecured credit rules was published on...
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RESPONSE TO FEEDBACK RECEIVED –
PUBLIC CONSULTATION ON LEGISLATIVE AMENDMENTS TO CREDIT CARD
AND UNSECURED CREDIT RULES
CONTENTS
1 Introduction ............................................................................................. 2
2 Definitions................................................................................................ 2
3 Excluded unsecured credit facilities ......................................................... 5
4 Corporate and business cards ................................................................ 11
5 Minimum qualifying criteria ................................................................... 13
6 Regulatory credit limits (2/4 months’ income) ....................................... 14
7 60 days past due rule ............................................................................. 15
8 12 months’ income industry-wide limit .................................................. 19
9 Solicitation restrictions .......................................................................... 24
10 Information calling credit-worthiness into question .............................. 29
11 Credit bureau checks ............................................................................. 32
12 Income checks ....................................................................................... 36
13 Disclosure requirements ........................................................................ 40
14 Reporting requirements in notices 759 and 760 .................................... 44
15 Implementation timeline ....................................................................... 50
16 Annex ..................................................................................................... 53
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1 INTRODUCTION
1.1 A public consultation paper on draft legislative amendments to the
credit card and unsecured credit rules was published on 11 Sep 2013 (“the
Consultation Paper”). The consultation closed on 10 Oct 2013, with feedback
received from the Association of Banks in Singapore (“ABS”)1, Financial
Institutions (“FIs”) and members of the public.
1.2 MAS has carefully considered the feedback received, and comments
that are of wider interest, together with our responses, are set out below.
MAS has also taken the feedback into account in finalising the amendments to
the Banking (Credit Card and Charge Card) Regulations (“Credit Card
Regulations”), MAS Notices 118, 635, 827, 1109, 116, 633, 826, 1107, 603, 759
and 760.2 We thank all respondents for their comments.
2 DEFINITIONS
Definition of “unsecured credit facility”
Fluctuations in the value of security provided
Feedback
2.1 Respondents sought clarification whether a facility that is fully secured
when it is granted will be considered an “unsecured credit facility” and be
caught within the ambit of the unsecured credit rules if the value of the
security provided subsequently drops to less than the balance outstanding.
MAS’ Response
2.2 MAS has clarified in the final Regulations and Notices that whether a
credit facility is to be deemed to be secured is determined at the point when
the facility is granted. The unsecured credit rules will therefore not apply to
those credit facilities that are fully secured at the point of inception.
1 ABS submitted comments on behalf of 13 FIs.
2 In these Responses, the final revised rules issued on 29 November 2013 are referred to as “final
Regulations and Notices”, while the draft revised rules set out in the Consultation Paper issued on 11 September 2013 are referred to as “draft revised Regulations and Notices”.
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Definition of outstanding amounts
Amounts in default or written off
Feedback
2.3 One respondent sought clarification as to whether amounts in default
and written off have to be included in a borrower’s outstanding amount for the
purpose of determining an individual’s total outstanding unsecured amount.
MAS’ Response
2.4 Amounts that are in default and written off have to be included in a
borrower’s outstanding amount unless there is legal certainty to the borrower
that the lender will no longer seek repayment of the defaulted amount, for
example, where the lender has executed a settlement agreement with the
borrower or where the borrower has been discharged from bankruptcy in
relation to the defaulted amount.
Amounts outstanding on guaranteed cards
Feedback
2.5 One respondent sought clarification on the requirement to include at
least 20% of the amount outstanding on an unsecured credit/charge card
issued to an individual above 55 years old, that has been guaranteed by a
Singapore guarantor (“guaranteed card”), in the Singapore guarantor’s
aggregate outstanding amount.
MAS’ Response
2.6 In determining whether a Singapore guarantor’s overall debt has
exceeded the 12 months’ income industry-wide limit, at least 20% of the
outstanding amount on the card guaranteed by the Singapore guarantor has to
be included in the guarantor’s overall unsecured debt.3 The definition in the
3 For the purpose of ensuring ongoing compliance with the per FI credit limit of 2 months’ or 4 months’
income, however, the entire amount outstanding on a guaranteed card has to be included in the Singapore guarantor’s aggregate outstanding card amount and total outstanding unsecured amount. This is consistent with the proposal consulted upon in December 2012. The definitions in the final Credit Card Regulations for “aggregate outstanding card amount” and “total outstanding unsecured amount” have been clarified to reflect this.
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final Credit Card Regulations for “cumulative total outstanding unsecured
amount” has been clarified to reflect this.
Amounts outstanding on joint loans
Feedback
2.7 One respondent noted that the rules deem a borrower’s share of the
outstanding balance of an unsecured credit facility to be the outstanding
balance divided by the number of borrowers to the loan. The respondent
asked whether the number of joint borrowers will be reported by the credit
bureaus and, if not, whether FIs can rely on customer declarations to
determine the number of joint borrowers to an unsecured credit facility.
MAS Response
2.8 FIs should discuss with the credit bureaus how they want information
on the number of joint borrowers to be reported. The credit bureaus currently
already indicate whether a loan was taken out by single or joint borrowers. If
FIs are unable to determine the borrower’s share of the outstanding balance
from the information in the credit bureaus, FIs should obtain a copy of the loan
agreement, where possible, to ascertain the number of joint borrowers to the
loan.
Definition of “Singapore borrower”
Whether the unsecured credit rules apply to all individuals regardless of nationality
Feedback
2.9 One respondent sought confirmation whether the unsecured credit
rules apply to all individuals regardless of nationality.
MAS Response
2.10 The unsecured credit rules generally apply to all individuals regardless
of nationality. Where a rule is intended to apply only to Singapore citizens and
permanent residents, the term “Singapore borrower” is used.
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3 EXCLUDED UNSECURED CREDIT FACILITIES
Scope of application
Application of rules to excluded unsecured credit facilities
Feedback
3.1 One respondent requested that MAS provide detailed guidance on the
application of each of the requirements in MAS’ credit cards and unsecured
credit rules to each type of excluded credit facility.
MAS’ Response
3.2 FIs should refer to the final Regulations and Notices to determine their
scope of application. Unless specifically carved out in the relevant provisions,
the requirements apply to all excluded credit facilities.
Renovation loans
Maximum amount of renovation loan permitted
Feedback
3.3 One respondent sought clarification as to the maximum amount of
renovation loan that could be granted, citing an example of a renovation loan
granted jointly to a main borrower (who has a monthly income of $2,500) and
a joint borrower (who has a monthly income of $1,000). The respondent also
sought clarification on the maximum amount of subsequent renovation loans
that can be granted to each of these borrowers.
MAS Response
3.4 Each borrower’s share of a renovation loan is capped at the lower of
$30,000 or 6 months’ income of the borrower. The maximum amount of a joint
renovation loan is therefore pegged to the income of the party with the lower
income. In the example cited, assuming that neither have any other
renovation loans, the maximum amount of the joint renovation loan that can
be granted would be $12,000 (the joint borrower’s half share of the joint
renovation loan = $6,000 = 6 months of his income).
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3.5 The maximum amount of a subsequent renovation loan that the main
borrower can obtain is $9,000 (6 months of his income – his half share of the
joint renovation loan = 6 x $2,500 - $6,000 = $9,000).4 The joint borrower will
not be able to obtain any further renovation loan as half of the joint
renovation loan already amounts to 6 months of his income.
Proof of relationship and loan tenure
Feedback
3.6 One respondent sought confirmation that FIs can rely on customer
declarations as proof of the relationship of joint borrowers and that the loan
repayment period does not exceed 5 years.
MAS Response
3.7 FIs should obtain objective documentary proof, such as a marriage
certificate or birth certificate, of joint borrowers’ relationship where possible.
FIs should rely on the loan agreement to determine that the loan repayment
period does not exceed 5 years.
Checks in relation to earlier renovation loans
Feedback
3.8 One respondent asked if outstanding balance of renovation loans
would be available in the credit bureaus.
MAS Response
3.9 The outstanding balances of renovation loans should be reported to
and by the credit bureaus, as part of borrowers’ aggregate outstanding
balances.
4 This assumes that the full amount of the joint renovation loan remains unpaid. If part of the joint
renovation loan has been repaid, his half share of the renovation loan should be computed based on the balance that remains outstanding on the joint renovation loan.
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Whether checks required in relation to renovation loans only apply to non-card applicants
Feedback
3.10 One respondent noted that specific checks on renovation loans are
stated in MAS Notice 635 but not in the Credit Card Regulations, and asked if
the checks are only required in relation to non-card applicants.
MAS’ Response
3.11 Checks are required of all excluded renovation loans, regardless of
whether the borrower is a cardholder or not. The requirements are only set
out in MAS Notice 635, and not the Credit Card Regulations, because
renovation loans are considered unsecured credit facilities, not credit cards or
charge cards.
Action to be taken if marriage certificate is not provided within 3 months
Feedback
3.12 One respondent commented that it would be onerous for FIs to adjust
credit lines to comply with the limits set out in Appendix 1 of the draft revised
Notice 635 when borrowers who take a renovation loan jointly with their
fiancé/fiancée fail to submit their marriage certificates within 3 months of the
disbursement of the loan.
MAS’ Response
3.13 The rules currently only allow renovation loans granted jointly to a
borrower and his/her spouse5 to be excluded from the unsecured credit rules.
However, in recognition of engaged couples’ need to finance the renovation of
their future homes, MAS will further allow renovation loans taken jointly by a
borrower with his/her fiancé/fiancée to be excluded from the unsecured credit
limits.6 This is a liberalisation of existing rules and, to avoid circumvention of
5 Or a child, parent or sibling.
6 Such renovation loans will be excluded from the minimum income qualify criterion, the 2/4 months’
income per-FI credit limit, the 60 days past due rule and the 12 months’ income industry-wide limit.
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the rules, it is essential for couples seeking to qualify for exclusion to submit a
marriage certificate within 3 months of the disbursement of their renovation
loan as evidence of their intent to marry.
3.14 FIs that find it excessively burdensome to adjust credit lines when
borrowers do not submit their marriage certificates within 3 months of the
disbursement of their renovation loans can choose to:
(a) disburse single-borrower loans; or
(b) disburse a joint-borrower loan where the total amount disbursed
prior to the receipt of the marriage certificate, when added to
the borrowers’ respective shares of all earlier renovation loans,
does not exceed the lower of the following:
(i) 6 months’ income of either of the borrowers; and
(ii) $30,000.
Renovation loans granted to engaged or married couples who subsequently divorce
Feedback
3.15 One respondent asked whether FIs are required to take any steps in
relation to a renovation loan granted jointly to an engaged or married couple,
if they subsequently divorce.
MAS’ Response
3.16 No. FIs are not required to take any steps when an engaged or married
couple subsequently divorce, provided that the prescribed checks and
conditions were satisfied when the loan was granted. In relation to renovation
loans granted to engaged couples, this would include providing a copy of their
marriage certificate to the lender within 3 months of the disbursement of the
loan.
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Other excluded unsecured credit facilities
Bridging loans
Feedback
3.17 One respondent commented that bridging loans should not be deemed
to be unsecured credit facilities as that would cause borrowers’ aggregate total
outstanding unsecured amounts to exceed 12 months of their income.
MAS’ Response
3.18 MAS’ Bridging Loan Notices (MAS Notices 633, 826, 1107 and 116)
currently already subject unsecured bridging loans to regulatory credit limits.
However, bridging loans that are secured on the property to be sold, or the
proceeds from the sale thereof, are deemed to be secured credit facilities and
thus will not be subject to the regulatory limits on unsecured debt.
Business loans
Feedback
3.19 One respondent queried whether business loans and unsecured trade
lines such as letters of credit, trust receipts, import/export financing,
receivables financing granted to non-individuals, such as companies, were
subject to the overall credit limit in MAS’ unsecured credit rules.
MAS’ Response
3.20 MAS’ unsecured credit rules set out in MAS Notices 635, 827, 1109,
118, 633, 826, 1107, and 116 do not apply to loans granted to non-individuals
such as companies.
Share financing loans
Feedback
3.21 One respondent sought confirmation that the minimum income
requirement, the per-FI regulatory credit limit of 2/4 months’ income and the
industry-wide 12 months’ income limit will not apply to share financing loans
for the purchase of shares in the secondary market.
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MAS’ Response
3.22 Yes, the share financing loans referred to in regulation 6(9)(h) of the
final Credit Card Regulations include loans for the purchase of shares through
IPOs as well as in the secondary market.
Staff loans
Feedback
3.23 One respondent queried whether amounts outstanding on secured
loans have to be included in the aggregate of the outstanding balances of all
earlier loans granted to a lender’s officer or employee. Another respondent
sought clarification as to whether the total amount of unsecured credit that a
FI could grant to an officer or employee was capped at:
(a) one year of the officer or employee’s emoluments; or
(b) one year’s emoluments, and two months’ income (if his annual
income was less than $30,000) or four months’ income (if his
annual income was at least $30,000).
MAS’ Response
3.24 Only amounts outstanding on unsecured credit facilities have to be
included in computing the aggregate of the outstanding balances of all earlier
loans granted by a lender to its officer or employee. Where the loan granted
earlier is only partially secured, only the difference between the amount of the
loan and the market value7 of the security has to be included.
3.25 The maximum amount of unsecured credit that a FI can grant to an
officer or employee is one year of the individual’s emoluments, excluding
those loans listed in regulations 6(9)(a) to (h) of the final Credit Card
Regulations.
7 This could be either the market value of the security at the time the loan was granted, or the latest market
value of the security documented in the lender’s records.
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4 CORPORATE AND BUSINESS CARDS
Scope of application of the credit card rules
Whether credit card rules apply to corporate and business cards
Feedback
4.1 Several respondents submitted that corporate and business cards
should be exempted from the credit card rules because such cards are issued
based on the financial standing of the corporate/businesses rather than the
credit-worthiness of the cardholders.
MAS Response
4.2 MAS agrees that corporate and business cards where the cardholder
bears no personal liability can be exempted from the credit card rules. This has
been clarified in the final Credit Card Regulations.
4.3 However, some social safeguards should be applied to corporate and
business cards for which the cardholders bear some liability. Examples include
cards in respect of which the corporation and business share liability with the
cardholder on a joint and several basis. For such cards, FIs are already required
to abide by the rules relating to solicitation, disclosure of fees and charges, and
credit bureau checks. FIs are also required to apply the minimum income
requirements to corporate and business cards, except where (i) the card is
required for travel overseas and for the purchase goods and services in
connection with the travel or business; or (ii) the card cannot be used for
personal and entertainment purposes. These rules will continue to apply,
including the new rules that require FIs to:
(a) review aggregate outstanding balances and credit limits of
facilities reported to the credit bureaus in credit bureau checks;
(b) conduct income and credit bureau checks before increasing
credit limits and when negative information is received on the
cardholders’ credit-worthiness;
(c) obtain the cardholders’ consent to credit limit increases, and
the amounts thereof;
(d) request their cardholders to indicate their preferred credit
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limits when granting new applications and when increasing
credit limits; and
(e) provide enhanced disclosure on how debt will accumulate if
outstanding balances are not paid in full.
4.4 To facilitate payment of business expenses, corporate and business
cards will be exempted from the regulatory credit limits (2/4 months’ income
per FI, and 12 months’ income on an industry-wide basis) and the 60 days past
due rule. The application of the credit card rules to corporate and business
cards is summarised in the Annex for ease of reference.
4.5 Given the exemptions allowed to corporate/business cards, MAS urges
FIs to be alert to the risk of corporate/business cards being used as a means to
circumvent credit card rules applied on individuals. MAS is also of the view
that individuals may take on the corporate liability of their employers through
corporate/business cards with joint and several liability. As this exposes the
individuals to debt incurred by their employers, MAS will further review the
industry’s practice of issuing corporate/business cards with such shared
liability.
Whether FIs have to obtain the corporation’s consent to the credit limits
of corporate cards
Feedback
4.6 It was asked whether FIs have to obtain the consent of the corporation
on the credit limit of the corporate cards.
MAS Response
4.7 FIs are only required to obtain the cardholders’ consent to the credit
limits of corporate cards with personal liability. Apart from the rules, FIs may
wish to consider if it is a good practice to obtain the consent of the corporation
on the credit limits of corporate cards.
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5 MINIMUM QUALIFYING CRITERIA
Application of the minimum income requirement
Whether the minimum income requirement applies on an ongoing basis
Feedback
5.1 One respondent sought confirmation that existing principal cardholders
are not required to meet the minimum income criterion for the issue of new
unsecured credit cards.
MAS’ Response
5.2 The minimum income criterion only applies at the point of application
of the first unsecured credit card or charge card with the FI. However, even for
new unsecured credit cards issued to existing cardholders, the credit limits for
these new cards must take into account the income profiles of the cardholders.
Minimum qualifying criteria for individuals above 55 years old
Whether one or more minimum requirements have to be satisfied
Feedback
5.3 One respondent sought clarification as to whether individuals above 55
years old are required to have (a) total net personal assets exceeding
$750,000; (b) a foreign guarantor; or (c) a Singapore guarantor with an annual
income of at least $30,000; and (d) an annual income of at least $15,000, in
order to qualify for an unsecured credit card. Respondents also asked if FIs
have the discretion not to offer guaranteed cards, and to include additional
credit assessment criteria besides the minimum requirements prescribed by
MAS.
MAS’ Response
5.4 Individuals above 55 years old are only required to meet one of the
following criteria to qualify for an unsecured credit card or charge card:
(a) an annual income of at least $15,000;
(b) total net personal assets exceeding $750,000;
(c) a guarantor other than a Singapore guarantor;
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(d) a Singapore guarantor with an annual income of at least
$30,000.
5.5 The offer of guaranteed cards is a commercial decision. In addition to
the criteria above, FIs can also set their own lending and credit assessment
criteria beyond the minimum requirements prescribed by MAS.
6 REGULATORY CREDIT LIMITS (2/4 MONTHS’ INCOME)
Cards issued to individuals above 55 years old
Credit limits of guaranteed cards
Feedback
6.1 One respondent asked whether the credit limit of a guaranteed credit
card will be based on the guarantor’s income, and whether an existing
cardholder who has already been granted his maximum or overall credit limit
can guarantee an unsecured credit card issued to another individual.
MAS’ Response
6.2 The credit limit of a guaranteed credit card will be based on the
Singapore guarantor’s income. A cardholder who has already been granted his
maximum or overall credit limit can guarantee an unsecured credit card issued
to another individual, as long as the amounts outstanding on the guaranteed
card and those outstanding on his own cards do not exceed his maximum and
overall credit limits.
Tracking balances outstanding on guaranteed cards
Feedback
6.3 One respondent asked if credit bureau reports will identify whether a
card was issued with a guarantor, and whether an applicant/existing borrower
was a guarantor. Another respondent asked if the credit bureaus can assign
the balances outstanding on guaranteed cards to the credit reports of the
guarantors.
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MAS Response
6.4 FIs should discuss data reporting specifications and template with the
credit bureaus, including how the balances outstanding on guaranteed cards
can be linked to the accounts of the guarantors. A linkage is necessary to
ensure compliance with the industry-wide limit of 12 months’ income. At least
20% of the balances outstanding on guaranteed cards are to be added to a
Singapore guarantor’s cumulative total outstanding unsecured amounts for the
purpose of complying with the 12 months’ income limit.
Unsecured credit facilities
Drawdown on unsecured credit facilities
Feedback
6.5 Clarification was sought on the rule requiring FIs to disallow any
amount to be drawn down on an unsecured credit facility by a Singapore
borrower if that would result in his total outstanding unsecured amount
exceeding his overall credit limit. Specifically, it was asked whether the mere
granting of a credit limit for a revolving unsecured credit line constitutes a
drawdown for the purpose of this rule.
MAS Response
6.6 Drawdown refers to the disbursement of an unsecured credit facility.
The mere granting of a credit limit, without disbursement, does not constitute
a drawdown for the purpose of the rule.
7 60 DAYS PAST DUE RULE
Suspension
Determining whether a borrower is past due
Feedback
7.1 Respondents sought clarification as to the meaning of being 60 days
past due, and whether FIs are permitted to determine whether a borrower is
past due based on their respective product terms and conditions.
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MAS’ Response
7.2 Being past due for 60 consecutive days or more means that the
individual has failed to pay the minimum amounts that he is contractually
required to pay, for at least 60 consecutive days. FIs are permitted to
determine whether a borrower is past due based on their respective product
terms and conditions.
Whether the rule extends to excluded unsecured credit facilities
Feedback
7.3 One respondent sought clarification as to whether FIs are required to
suspend the credit cards, charge cards and unsecured credit facilities of a
borrower who is 60 days or more past due on an excluded unsecured credit
facility such as an education loan or medical loan.
MAS’ Response
7.4 FIs have to suspend the credit cards, charge cards and unsecured credit
facilities of borrowers who are 60 days or more past due on an excluded
unsecured credit facility (other than a business loan8).
Date by which suspension has to be effected
Feedback
7.5 One respondent asked if FIs are expected to effect the suspension on a
daily basis, or as soon as practicable, given that suspension was contingent on
the credit bureaus being able to reflect borrowers’ past due status correctly
and promptly.
MAS Response
7.6 Suspension is required when a borrower becomes 60 days or more past
8 Business loans are entirely exempted from the 60 days past due rule i.e.
(a) FIs need not suspend the credit cards, charge cards and unsecured credit facilities of borrowers who are 60 days or more past due on business loans; and
(b) FIs may continue to grant or disburse business loans to borrowers who are 60 days or more past due on any credit card, charge card or unsecured credit facility.
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due on any credit card, charge card or unsecure credit facility granted to him
by the FI, and not other FIs. As FIs should know whether their borrowers are
60 days or more past due based on their own systems (this is not dependent
on the credit bureau), FIs are expected to effect the suspension within the day.
Excluding annual fees and disputed transactions from credit bureau
reporting
Feedback
7.7 One respondent asked whether, given that annual fees and disputed
transactions, charges and fees can be excluded from borrowers’ outstanding
amounts for the purpose of the 60 days past due rule, these amounts can be
excluded from the outstanding balances data submitted to the credit bureaus.
Another respondent asked if FIs would be given guidance on not reporting
borrowers who are 60 days or more past due only on small amounts.
MAS Response
7.8 As stated in paragraph 8.4 of MAS’ response to feedback issued on 11
September 2013 (“September Response”), borrowers who are unable to pay
even small amounts should be accorded even more protection. Instead of
exempting small amounts, which can be arbitrary, MAS will give FIs the
discretion to exclude annual fees, and disputed transactions, charges and fees,
from the balances. FIs should discuss the details of how to report data on
balances and borrowers who are 60 days or more past due with the credit
bureaus.
Transfer of outstanding amounts between suspended accounts
Feedback
7.9 One respondent sought clarification on the flexibility allowed to FIs to
transfer amounts outstanding on a card or unsecured credit facility to another
card or unsecured credit facility.
MAS’ Response
7.10 This flexibility is to enable FIs to transfer outstanding balances between
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credit facilities extended to the same borrower, for example, for debt
restructuring/re-financing purposes, even if the borrower is 60 days or more
past due on any of his credit cards or unsecured credit facilities.
Lifting the suspension
Requirements to be satisfied before suspension can be lifted
Feedback
7.11 One respondent asked if FIs are permitted to allow borrowers to
resume charging to their accounts once they are no longer past due, with the
necessary income and credit bureau checks to be conducted within 30 days
after the suspension is lifted.
MAS’ Response
7.12 No. All three criteria must be satisfied before the suspension is lifted.
Besides assessing that the account is no longer past due, FIs should also review
the credit-worthiness of the borrowers through fresh income and credit
bureau checks before lifting the suspension.
Income checks to be conducted before suspension can be lifted
Feedback
7.13 One respondent asked whether individuals who have been granted
unsecured credit on the basis of their net personal assets exceeding $2 million,
are required to satisfy the minimum income requirements of
$15,000/$20,000/$30,0009 before the suspension on their accounts can be
lifted. If not, the respondent sought confirmation that FIs are also not required
to review the income of an individual who has more than $2 million in net
personal assets before granting him an unsecured credit card or an unsecured
credit facility.
9 The minimum income requirements of:
(a) unsecured credit cards or charge cards issued to individuals above 55 years of age (without guarantors or whose total net personal assets do not exceed $750,000) is $15,000;
(b) unsecured credit facilities is $20,000; and
(c) unsecured credit cards or charge cards issued to individuals 55 years of age or below is $30,000.
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MAS’ Response
7.14 There is no requirement that the income of such individuals must be at
least $15,000, $20,000 or $30,000 (as the case may be) before the suspension
can be lifted. This, however, should not be confused with the minimum proof
of income required to qualify for a new card or unsecured credit facility.
Where income is the basis of one’s qualifying for such cards or unsecured
credit facility, proof of income must be obtained at the point of application,
even if the applicant’s total net personal assets exceed $2 million.
8 12 MONTHS’ INCOME INDUSTRY-WIDE LIMIT
Computation of aggregate unsecured debt
Whether business loans have to be included in borrowers’ cumulative total outstanding unsecured amounts
Feedback
8.1 One respondent asked if business loans offered to non-individuals such
as companies are caught by the 12 months’ income limit.
MAS’ Response
8.2 Loans granted for business purposes are excluded from the 12 months’
income limit. Further, MAS’ unsecured credit rules set out in MAS Notices 635,
827, 1109, 118, 633, 826, 1107, 116 and 603 do not apply to loans granted to
non-individuals such as companies.
Clarifying the application of the limit to interest-free instalment plans
Feedback
8.3 Respondents sought clarification on the application of the 12 months’
income limit to interest-free instalment plans.
MAS’ Response
8.4 As stated in paragraph 9.37 of the September Response, balances that
do not attract interest can be excluded from borrowers’ aggregate unsecured
debt. Only interest-bearing balances have to be included. For instance, where
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an instalment on an interest-free instalment plan is late and interest is
imposed on this instalment, the instalment amount will have to be included in
the borrower’s aggregate unsecured debt. If, notwithstanding this late
payment, interest is not imposed on the remaining unbilled amounts, FIs are
not required to include these unbilled amounts in the computation of the
borrower’s aggregate unsecured debt.
8.5 FIs should discuss how best to report non-interest-bearing balances to
the credit bureaus.
Income computation
Whether FIs should rely on a common income record and computation method
Feedback
8.6 Respondents asked if there should be a standard way of computing
income, and a common record of income in the credit bureaus, so as to ensure
consistency in the computation of the 12-months’ income limit across the
industry.
MAS’ Response
8.7 MAS has previously received feedback that FIs prefer to rely on the
income information in their own records, so that they are better able to
explain their computation methods (e.g. haircuts applied on variable income) if
queried by borrowers. As such, MAS will not require FIs to use a common
income record or computation method. Instead, MAS will allow FIs the
flexibility to either rely on their respective income records and computation
methods, or agree upon a common set of income records and computation
methods.
Whether FIs can rely on outdated income records
Feedback
8.8 Respondents asked if FIs can rely on the latest income information in
their records if borrowers do not provide updated income records despite the
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FIs’ requests. It was also queried if FIs can verify customers’ income through
alternative means, such as employment checks.
MAS’ Response
8.9 FIs can rely on the latest income information in their records. Income
documents can be obtained from alternative sources besides the borrower,
but a confirmation from the employer that the individual is an employee is
insufficient.
Suspension
Whether other FIs have to suspend a borrower’s accounts once an FI does so
Feedback
8.10 One respondent asked whether, once a borrower’s accounts are
suspended by one FI, other FIs are required to similarly suspend the borrower’s
unsecured credit cards and unsecured credit facilities.
MAS’ Response
8.11 Other FIs will not be required to suspend the borrower’s accounts if
based on their respective income records, the borrower’s aggregate unsecured
debt has not exceeded 12 months of his income for 3 months or more.
However, once the accounts have been suspended, FIs cannot reinstate access
to these accounts until the individuals have reduced their unsecured debt to
below 12 months’ income and the FIs have conducted credit bureau checks
and obtained updated income documents.10
Exceptions to suspension
Consolidation of debt owed to other FIs
Feedback
8.12 With regard to borrowers who are seeking to refinance and restructure
their existing debts with other FIs, one respondent noted that unsecured credit
10
FIs are also required to conduct credit bureau checks before reinstating the accounts.
22
for re-financing purposes can be granted to a borrower even if his overall debt
has exceeded his 12 months’ income for a period of 3 months or more. The
respondent, however, sought clarification as to the requirement that the
unsecured credit granted for re-financing purposes does not lead to an
increase in a borrower’s overall debt.
MAS’ Response
8.13 To ensure that the new unsecured credit is truly extended for the
purpose of debt refinancing, FIs must take steps to ensure that the proceeds of
the new unsecured credit facility are used to repay amounts owed to another
lender, such that the borrower’s overall debt level across FIs does not increase.
Transfer of outstanding amounts between accounts
Feedback
8.14 One respondent sought clarification whether, for debts that are
transferred from one facility to another, the 3-month period (used for
determining whether one’s overall debt has exceeded his 12 months’ income
for 3 months) would be computed from the date of the transfer of the
outstanding amounts.
MAS’ Response
8.15 The 3-month period should be computed from the time his cumulative
total outstanding unsecured amount first crosses 12 months’ income; it is only
reset when his cumulative total outstanding unsecured amount is reduced to
below 12 months of his income.
Implementation
Periodic checks on borrowers’ aggregate unsecured debts
Feedback
8.16 One respondent suggested that FIs be required to check only once
every 6 months whether their borrowers’ aggregate unsecured debts have
exceeded 12 months’ income for 3 months or more.
23
MAS’ Response
8.17 It would not suffice for FIs to review their borrowers’ aggregate
unsecured debts only once every 6 months. As data in the credit bureau is
updated monthly currently, FIs should, at the minimum, conduct monthly
reviews of their borrowers’ aggregate debt.
Reduction in aggregate debt between monthly uploads to the credit
bureaus
Feedback
8.18 Respondents highlighted that borrowers may reduce their aggregate
unsecured debt to below the 12 months’ income limit during the time in
between monthly data uploads to the credit bureaus.
MAS’ Response
8.19 The final Regulations and Notices allow FIs to supplement information
in the credit bureaus with other credible information. Examples include
payment slips or the latest bank statements provided by their borrowers to
indicate that they have reduced their aggregate total outstanding unsecured
amounts to below 12 months’ income.
Extended concessionary timeline for borrowers whose existing aggregate unsecured debt exceeds 12 months’ income
Feedback
8.20 Respondents noted that an extended concessionary timeline may be
extended to borrowers whose current aggregate unsecured debt exceed 12
months of their income, but raised concerns about being unable to determine
whether borrowers’ current aggregate unsecured debt exceed 12 months’
income.
MAS’ Response
8.21 The final Regulations and Notices provide concessions for borrowers
whose cumulative total outstanding unsecured amount as at November 2013
exceed 12 months of their income. FIs should work with the credit bureaus to
24
compute their borrowers’ cumulative total outstanding unsecured amounts as
at November 2013. Alternatively, FIs can ask their borrowers whose lines are
to be suspended to provide them with evidence of their aggregate unsecured
debt as at November 2013, for example, by furnishing copies of his credit card
statements as at November 2013 from all FIs. Borrowers who would like to
avail themselves of the extended concessionary timeline need to have their
November 2013 debt levels computed by 1 June 2015, when the 12 months’
income limit takes effect.
8.22 Under the extended concessionary timeline, the 12 months’ income
industry-wide limit need not be applied to —
(a) borrowers whose cumulative total outstanding unsecured
amounts as at November 2013 fall between 12 and 16 months of
their income until 1 June 2017; and
(b) borrowers whose cumulative total outstanding unsecured
amounts as at November 2013 exceed 16 months’ income until 1
June 2019,
provided the borrowers enter into repayment plans with their FIs.
8.23 For the avoidance of doubt, if, after 1 June 2017 or 1 June 2019, as the
case may be, the borrower’s cumulative total outstanding unsecured amount
still exceeds 12 months of his income for 3 months or more, the repayment
plans can continue beyond the extended timeline of 1 June 2017 and 1 June
2019, as the case may be, but the FIs must then suspend his unsecured credit
cards and unsecured credit facilities.
9 SOLICITATION RESTRICTIONS
New credit cards and unsecured credit facilities
Whether the requirement for a signature can be fulfilled electronically
Feedback
9.1 Respondents asked whether signatures can be provided electronically,
for instance by existing borrowers who apply for new credit cards or unsecured
25
credit facilities through online banking, after authenticating themselves and
logging into their accounts.
MAS’ Response
9.2 Yes, the requirement for a signature may be fulfilled electronically in
accordance with the requirements set out in the Electronic Transactions Act
(Cap. 88).
Whether re-branded co-brand cards can be reissued to existing
cardholders as replacement cards
Feedback
9.3 One respondent asked if co-brand cards that are to be re-branded can
be reissued to existing cardholders as replacement cards, if they are due to
expire.
MAS’ Response
9.4 The Credit Card Regulations define a replacement card to be of the
same kind as the card being replaced. A replacement card shall be regarded as
the same kind as the card being replaced if the type, terms, conditions and
branding, and the fees and charges relating to the use, of the replacement card
are the same as those of the card being replaced.
Whether FIs can rely on documents other than application forms
Feedback
9.5 One respondent asked whether FIs can rely on documents other than
application forms to obtain their borrowers’ indication as to their preferred
credit limits, if the documents are signed.
MAS’ Response
9.6 Yes.
26
Whether FIs can assume that their customers do not have a preferred credit limit if none is indicated
Feedback
9.7 Respondents asked whether, if their borrowers do not indicate a
preferred credit limit, FIs can assume that they do not have a preferred credit
limit and can grant them credit limits up to the regulatory credit limits.
Another respondent asked if preferred credit limits have to be indicated in
relation to charge cards, which do not have credit limits.
MAS’ Response
9.8 Where customers do not state a preferred credit limit, FIs have to
obtain their customers’ express consent to the credit limit to be granted, to
ensure that he is comfortable with the limit. FIs can, however, give their
customers the option of indicating that they are agreeable to any credit limit
determined by the FI, or to not having any limits assigned to their cards.
Credit limit increases
Whether borrowers’ signed consent is required for the reallocation of existing credit limits
Feedback
9.9 One respondent asked if FIs are required to obtain a borrower’s signed
consent before reallocating his existing credit limits from one unsecured credit
card/unsecured credit facility to another.
MAS’ Response
9.10 Provided there is no increase in a borrower’s aggregate credit limit, FIs
are not required to obtain a borrower’s signed consent before reallocating his
existing credit limits from one unsecured credit card/unsecured credit facility
to another. However, in the case of an increase in credit limit on a guaranteed
card, both the signed consent of the cardholder and his guarantor have to be
obtained.
27
Whether supplementary cardholders’ consent is required for credit limit increases
Feedback
9.11 One respondent queried if is necessary to obtain supplementary
cardholders’ consent for increases to the credit limits of their supplementary
cards.
MAS’ Response
9.12 FIs are required to obtain the consent of both principal and
supplementary cardholders before increasing the credit limits on
supplementary cards. This is consistent with the requirement for applications
for new credit cards, and addresses feedback from supplementary cardholders
that they prefer to be able to indicate credit limits that they are comfortable
with.
Requirement for FIs to obtain borrowers’ consent to their aggregate credit limits
Feedback
9.13 One respondent sought clarification as to whether regulation 7(2E) in
the draft revised Credit Card Regulations contained any additional requirement
not set out in regulations 7(2C) and 7(2D). A similar clarification was requested
in relation to paragraphs 18A, 18C and 18D of the draft revised MAS Notice
635.
MAS’ Response
9.14 Draft regulation 7(2C) and draft paragraph 18A require borrowers to
consent to the amount of the increases, reflecting Proposal E as set out in the
consultation paper issued on 21 December 2012. Draft regulation 7(2D) and
draft paragraph 18C require FIs to allow customers to indicate their preferred
aggregate credit limits, reflecting Proposal F as set out in the consultation
paper issued on 21 December 2012. Draft regulation 7(2E) and draft
paragraph 18D are intended to make it abundantly clear that FIs cannot grant
credit limits that are higher than those consented to or indicated by their
28
customers.
Period within which increase must be effected
Feedback
9.15 One respondent commented that FIs may choose to observe their
borrowers’ payment behaviour for at least 6 months before effecting credit
limit increases requested by their customers. Therefore, the requirement for
consent on the amount of the credit limit increases to be obtained within a
month prior to the increase may pose some operational difficulty for the FIs.
MAS’ Response
9.16 MAS is supportive of FIs observing and considering customers’ payment
behaviour before effecting credit limit increases. However, to ensure that
customers’ preferred credit limits have not changed during the observation
period, customers’ consent should be obtained closer to the time of (and, in
any case, no more than a month before) the credit limit increase.
Confirmation of requests made over the telephone
Scope of application of the requirement for confirmation
Feedback
9.17 Respondents sought clarification on the requirement for a FI to obtain a
borrower’s confirmation for a verbal request made by the borrower in the
course of a telephone call initiated by the FI. Specifically, respondents asked
whether the requirement applies to requests for new credit facilities,
temporary and permanent credit limit increases and additional credit cards.
MAS’ Response
9.18 The confirmation requirement applies to all types of requests made by
borrowers, that are specifically mentioned in the Credit Card Regulations and
MAS Notices 635, 827, 1109 and 118, including requests for new credit cards
and unsecured credit facilities, and credit limit increases. It does not apply to
replacement, additional and substitute credit cards.
29
9.19 For the avoidance of doubt, the requirement for confirmation 5
business days after the initial telephone call only applies where the request is
made by a borrower in the course of a telephone call initiated by a FI. This is
to ensure that the borrower has sufficient time, following the initial telephone
call, to consider whether to proceed with the request. The confirmation
requirement does not apply where the telephone call is initiated by the
borrower, for example, for an urgent credit limit increase.
9.20 MAS has clarified in the final Regulations and Notices that the
confirmation requirement applies only when both the initial request and
confirmation are made through telephone calls initiated by the FI. Where the
borrower subsequently initiates and submits a written request to the FI, the
confirmation requirement does not apply, even if the written request was
precipitated by a telephone call initiated by the FI. An example would be
where a FI calls a borrower offering a credit limit increase, and the borrower
agrees over the telephone call. The FI then sends the borrower an application
form for the credit limit increase via e-mail, fax or normal mail, which the
borrower completes and submits to the FI. In this situation, the requirement
for confirmation 5 business days after the FI’s initial telephone call does not
apply because the borrower would have had the opportunity and time to
consider whether to complete and submit the written application form.
10 INFORMATION CALLING CREDIT-WORTHINESS INTO QUESTION
Information
Source of alerts
Feedback
10.1 One respondent asked whether FIs are required to act on information
provided by third parties such as a spouse or employer. Another respondent
suggested that FIs require the person who provides the information to identify
himself.
30
MAS’ Response
10.2 As stated in paragraph 4.2 of the September Response, the rule
requires FIs to act on information provided by anyone, which can include the
borrower’s spouse or employer. To ensure greater accountability, MAS has
clarified in the final Regulations and Notices that FIs will only be required to act
on information provided by a person who identifies himself. However, FIs
must honour any request for confidentiality that the informant may make, and
cannot disclose his identity to the borrower where confidentiality is requested.
Types of alerts on which FIs have to act
Feedback
10.3 One respondent asked whether, in relation to a revolving facility, an
alert of a lawsuit of any amount triggers the requirement to conduct a credit
bureau and income check.
MAS’ Response
10.4 The rule requires FIs to act on any information that calls the credit-
worthiness of a borrower into question. If the lawsuit may impinge on the
creditworthiness of a borrower, credit bureau and income checks have to be
conducted unless these have already been conducted within the last 3 months,
or if the borrower’s credit lines are already suspended.
Whether credit bureaus will send triggers to FIs
Feedback
10.5 One respondent asked whether triggers will be set up in the credit
bureaus to alert FIs to borrowers whose credit-worthiness are in question, and
whether the credit bureaus will check to ensure that the events resulting in the
trigger are valid.
MAS’ Response
10.6 This rule does not require triggers to be set up in the credit bureaus.
31
Action to be taken
Action to be taken following credit bureau and income checks
Feedback
10.7 One respondent asked whether FIs are required to suspend the credit
lines of borrowers and approach them to discuss repayment options if the
credit bureau and income checks confirm that the borrower is still credit-
worthy.
MAS’ Response
10.8 FIs have the discretion to decide the action to be taken based on their
credit assessments.
Alerts relating to borrowers who are not FIs’ customers
Feedback
10.9 One respondent asked whether FIs can choose not to retain
information received about persons who are not their customers, given that
FIs will have to conduct credit bureau and income checks before granting any
new cards or unsecured credit facilities.
MAS’ Response
10.10 While it is not a requirement, MAS encourages FIs to retain alerts about
persons who are not their customers in their records, to aid their potential
future credit assessments.
Checks are not required if FIs suspend all facilities
Feedback
10.11 One respondent asked if paragraph 28 of the draft revised MAS Notice
635 applies to credit limit increases and unsecured credit facilities that have
not been fully drawn upon.
MAS Response
10.12 Paragraph 28 of the draft revised MAS Notice 635 means that FIs need
not conduct income checks even when information that calls the credit-
worthiness of a borrower into question is received, provided the bank does not
32
grant any further unsecured credit to the borrower until all amounts
outstanding are repaid.
11 CREDIT BUREAU CHECKS
Data specifications and template
Whether FIs are expected to provide information on credit limits to the credit bureaus
Feedback
11.1 One respondent asked whether FIs are expected to provide information
on their borrowers’ credit limits to the credit bureaus by 1 June 2014.
MAS’ Response
11.2 Yes, members of the credit bureaus are expected to provide credit limit
data to the credit bureaus by 1 June 2014.
Whether balances and limits of term loans have to be reported
Feedback
11.3 Respondents sought clarification as to whether the credit limits and
balances of non-revolving term loans have to be included in borrowers’
aggregate credit limits and balances data.
MAS Response
11.4 The credit limits and outstanding balances of non-revolving term loans
have to be included in the aggregate credit limits and balances data reported
to and by the credit bureaus.
Why balances and limits of secured credit cards are excluded
Feedback
11.5 One respondent asked why information on secured credit cards is
excluded, even though data on secured facilities are included.
MAS’ Response
11.6 As stated in paragraph 2.8 of the September Response, the credit limits
33
and outstanding balances of secured credit/charge cards are secured by
deposits, and thus should not be reported to and by the credit bureaus to
protect the confidentiality of deposit information.11 For the same reason, MAS
has further clarified in the final Regulations and Notices that the credit limits
and outstanding balances of overdrafts that are fully secured by deposits
should not be disclosed to or by the credit bureaus.
11.7 For the avoidance of doubt, this does not preclude FIs from disclosing
other information (e.g. payment status) relating to secured credit cards and
overdrafts that are fully secured by deposits to the credit bureaus, where such
disclosure will not disclose deposit information.
Whether micro-credit cards have to be reported
Feedback
11.8 Respondents asked if information on micro-credit cards have to be
reported to and by the credit bureaus.
MAS’ Response
11.9 Yes, FIs should contribute data on micro-credit cards.
Whether staff loans are and have to be reported
Feedback
11.10 Respondents asked if information on staff loans have to be uploaded to
the credit bureaus, and whether such information is currently submitted.
MAS’ Response
11.11 FIs are expected to upload information on their staff loans to the credit
bureaus, and some banks currently already do so.
Whether business loans have to be reported to the credit bureaus
Feedback
11.12 Respondents asked whether business loans granted to sole
11
The credit limit and outstanding balance of a secured card are dependent on the amount of deposits placed with the card issuer.
34
proprietorships and partnerships, have to be reported to the credit bureaus.
MAS Response
11.13 Business loans do not have to be reported to the credit bureaus.
However, the credit bureaus may wish to consider including information
indicating whether an individual is a sole proprietor or partner. This is so that
FIs can seek further information on their borrowers’ liability for business loans,
if any, to aid their credit assessments.
Whether credit limits have to be reported in relation to charge cards
Feedback
11.14 Given that charge cards typically do not have credit limits, it was
proposed that FIs not be required to report credit limits of charge cards to the
credit bureaus.
MAS Response
11.15 Credit limits of charge cards must be reported to the credit bureaus.
One option is to equate the credit limit of a charge card with the amount
outstanding on the card. If this is not reported, the credit bureaus’ data could
show that a borrower has exceeded his credit limit in aggregate, when this is in
fact not the case.
How the balances of partially secured credit facilities should be reported
Feedback
11.16 There was concern that it would not be meaningful for the outstanding
balances of all partially secured credit facilities to be commingled and reported
in one category, because a single aggregated number would not give any
indication as to the extent to which the balances are secured.
MAS Response
11.17 MAS agrees with this observation and has clarified in the final
Regulations and Notices that FIs are permitted to report the secured and
unsecured balances of partially secured credit facilities separately to and by
35
the credit bureaus.
Whether temporary and permanent credit limits should be reported separately
Feedback
11.14 One respondent asked if temporary credit limits should be reported
separately from permanent credit limits, and on a month-on-month basis.
MAS’ Response
11.15 Members of the credit bureaus should discuss with the credit bureaus
whether temporary credit limits should be reported separately from
permanent credit limits, and on a month-on-month basis.
Use of credit bureau data
Whether FIs are required to consider both balances and credit limits data
Feedback
11.18 One respondent stated that it may not always be useful for FIs to
consider credit limits data, for example, where the borrower has already paid
off most of a large term loan.
MAS’ Response
11.19 FIs have the discretion to determine the way in which they will use the
information, and can choose to place less weight on the data where
appropriate.
11.20 Members of the credit bureaus may also wish to work with the credit
bureaus to assess, for example, whether it is more meaningful to equate the
credit limit of a term loan that has been disbursed to its outstanding balance.
Circumstances in which FIs are required to conduct credit bureau checks
Feedback
11.21 Respondents asked when FIs are expected to conduct credit bureau
36
checks.
MAS’ Response
11.22 FIs are currently already required to conduct comprehensive credit
bureau checks before granting new credit cards and unsecured credit facilities.
With effect from 1 December 2013, FIs will also be required to conduct
comprehensive credit bureau checks before increasing credit limits and when
they are alerted to information calling their borrowers’ credit-worthiness into
question. With effect from 1 June 2015, FIs also have to conduct credit bureau
checks to determine if their borrowers are 60 days or more past due on
facilities extended by other FIs, and if their aggregate unsecured debt exceeds
12 months of their income for 3 months or more.
Cost of credit bureau checks
Reasonableness of fees charged by credit bureaus
Feedback
11.23 One respondent commented that, given that mandatory credit bureau
checks are required, the fees charged by the credit bureaus should be
reasonable.
MAS Response
11.24 The amount of fees charged by credit bureaus is a commercial matter
in which MAS generally does not intervene.
12 INCOME CHECKS
Circumstances in which income checks are required
Checks prior to the grant of unsecured credit facilities
Feedback
12.1 One respondent highlighted that, even though a borrower with net
personal assets exceeding $2 million is exempted from the regulatory credit
limit, regulation 9B(1)(a) of the draft revised Credit Card Regulations requires
FIs to verify the income of such a borrower prior to issuing an unsecured credit
37
card to him.
MAS Response
12.2 Income verification is required because such borrowers remain subject
to the minimum income criteria required to qualify for an unsecured credit
card. To illustrate, an individual below 55 years of age with an annual income
of $10,000 would not qualify for an unsecured credit card, even if he has more
than $2 million of net personal assets.
12.3 Similarly, individuals above 55 years old are generally required to
produce proof of their income to establish that they have met the minimum
qualifying criteria and/or for FIs to determine their regulatory credit limits.
The only exceptions are where the individuals have net personal assets
exceeding $2 million or a guarantor, as illustrated in Table 1 below:
Table 1: Circumstances in which individuals above 55 years old have to prove their income when applying for an unsecured credit card
Individuals above 55 years old who qualify for an unsecured credit card based on
Credit limit of the unsecured credit card
Whether proof of cardholder’s income is required
(a) Annual income of at least $15,000;
Up to 2/4 months, depending on the cardholder’s income, unless he has an annual income of at least $120,000 or net personal assets exceeding $2 million.12
Yes.
(b) Net personal assets of at least $750,000;
Yes, unless he has net personal assets exceeding $2 million.
(c) Guarantor; or Determined based on the guarantor’s income or net personal assets.
No. Proof of income or net personal assets of the guarantor are, however, required.
12
If his annual income is less than $30,000, his regulatory credit limit would be 2 months’ income. If his annual income is at least $30,000 but less than $120,000, his regulatory credit limit would be 4 months’ income. If his annual income is at least $120,000, he would be exempted from the regulatory credit limit of 2/4 months’ income.
38
Individuals above 55 years old who qualify for an unsecured credit card based on
Credit limit of the unsecured credit card
Whether proof of cardholder’s income is required
(d) Singapore guarantor with annual income of at least $30,000.
The combined credit limit of the guaranteed card and the Singapore guarantor’s own cards is up to 4 months of the Singapore guarantor’s income,13 unless the Singapore guarantor has an annual income of at least $120,000 or net personal assets exceeding $2 million.14
No. Income documents of the Singapore guarantor are, however, required.
How income checks are to be conducted
Whether verbal confirmation is sufficient
Feedback
12.4 One respondent suggested that borrowers’ verbal confirmation that
their income levels have not changed should suffice.
MAS Response
12.5 No. A borrower’s verbal confirmation is not sufficient. Income
documents must be obtained for verification.
Relevant date for determining validity of income documents
Feedback
12.6 One respondent stated that the validity of income documents should
be determined based on the date of FIs’ receipt of the documents, rather than
the date of their issuance.
13
If the Singapore guarantor’s income subsequently falls to less than $30,000, the applicable regulatory credit limit will be reduced to 2 months’ income. 14
If the Singapore guarantor has an annual income of at least $120,000 or net personal assets exceeding $2 million, the card would be exempted from the regulatory credit limit of 2/4 months’ income.
39
MAS Response
12.7 It is more appropriate to use the date of issuance of the income
document as the date on which the document is received by the FI can be
significantly later than that on which it was issued. Borrowers’ income may
have changed significantly by the time it is received by FIs.
Documents required in relation to fixed income earners
Feedback
12.8 A respondent asked whether an income tax NOA that is not dated
within 3 months prior to (a) a credit limit increase; or (b) a receipt of
information calling the borrower’s credit-worthiness into question, is an
acceptable proof of income for a fixed income earner.
MAS Response
12.9 No. Income documents dated more than 3 months ago are generally
not acceptable in both situations as borrowers’ income could have changed.
FIs may, however, use a NOA dated more than 3 months ago to supplement
more updated documents. Updated proof of income is particularly important
where information calling the borrower’s credit-worthiness into question is
received as such information may point to recent unemployment. Likewise,
updated income documents are important before credit limits are increased as
requests for credit limit increases may be due to borrowers accumulating debt
and finding current limits insufficient.
12.10 The final Regulations and Notices has made a concession to accept NOA
dated more than 3 months ago for non-fixed income earners in recognition
that there may not be alternative reliable documents (e.g. payslips) that
individuals without fixed monthly incomes can furnish.
Documents required in relation to new applications
Feedback
12.11 A respondent queried if FIs may continue with their current practices of
accepting NOA, even if dated more than 3 months ago, as income documents
for new applications.
40
MAS Response
12.12 There is no change in the requirements relating to income documents
required for new applications. In recognition of FIs’ current practices, MAS will
allow NOAs dated more than 3 months ago to be used for assessing
applications for new credit cards and unsecured credit facilities.
13 DISCLOSURE REQUIREMENTS
Disclosure of late fees and charges to all borrowers
Date on which the requirement to disclose late fees and charges comes into effect
Feedback
13.1 One respondent asked when the requirement to disclose late fees and
charges to all borrowers comes into effect.
MAS Response
13.2 The requirement for FIs to disclose late fees and charges to all
borrowers is an existing rule, which is already in effect.
Additional disclosure for borrowers who do not pay in full
Whether the additional disclosures will be effective
Feedback
13.3 One respondent commented that borrowers will become desensitised
with repeated disclosures.
MAS’ Response
13.4 The disclosures will only be provided to borrowers who did not pay
their prior month’s bills in full. The disclosures will also be customised each
month based on the borrowers’ outstanding balances for the month, and will
not be identical.
41
Whether the additional disclosures are necessary for the affluent
Feedback
13.5 It was submitted that charge card users are typically more affluent, and
that the mandated disclosures may not be relevant for this group.
MAS Response
13.6 The disclosures only have to be made in relation to borrowers who did
not pay in full in the prior month. Such borrowers are at risk of debt problems,
and the disclosures are relevant to this group, regardless of their level of
affluence.
Whether the additional disclosures will mislead borrowers in thinking that they can defer payment for 6 months
Feedback
13.7 There was concern that the disclosure as to the total amount payable in
6 months if no payment is made might mislead borrowers into thinking that
they could defer payment for 6 months.
MAS’ Response
13.8 The disclosure statement clearly states that such a borrower would be
considered past due, and that future loan applications might be negatively
affected. The mandated disclosure is therefore unlikely to give borrowers false
comfort. FIs are also free to include additional caution in the disclosure
template.
Whether minimum payment is based on total amount payable including principal, interest and all applicable fees
Feedback
13.9 One respondent asked if the minimum payment is to be computed
based on the total amount payable, including principal, interest and all
applicable fees.
42
MAS’ Response
13.10 The minimum payment is the amount required under the terms and
conditions of the agreement with the borrower.
Whether fees and charges can be excluded in the computation
Feedback
13.11 One respondent suggested that the amounts disclosed should not
include fees and charges, such as late fees, annual fees etc., provided that a
disclaimer is included in the disclosure statement to highlight that the total
amount payable and the time needed to fully pay off the debts could be higher
if fees and charges were included.
MAS’ Response
13.12 Any fees and charges payable must be included in the computation of
the amounts set out in the disclosure statement, so as to better inform
borrowers of the cost of rolling over. A disclaimer does not provide the same
level of clarity to borrowers.
Difference between credit cards and charge cards
Feedback
13.13 One respondent sought clarification as to the difference between credit
cards and charge cards, given that the definitions of “credit cards” and “charge
cards” in the Banking Act (Cap. 19) appear to be identical. Another respondent
asked if a personal instalment loan issued with a linked repayment account
against which a debit card is issued would be considered to be a charge card.
MAS’ Response
13.14 The definitions of “credit card” and “charge card” in the Banking Act
are not identical. Rather, their respective definitions in the Banking Act
reference the common understanding of credit cards and charge cards.15 A
15
Section 56 of the Banking Act states that “credit card” or “charge card” means any article, whether in physical or electronic form, of a kind commonly known as a credit card or charge card or any similar article intended for use in purchasing goods or services on credit, whether or not the card is valid for immediate use.
43
charge card typically requires full payment of the entire outstanding balance
by the payment due date whereas a credit cardholder typically only needs to
pay a minimum amount by the payment due date. If the personal instalment
loan is revolving, regardless of whether the loan is linked to a debit card, the
disclosure is required under Notice 635.
Whether the additional disclosure has to be made in relation to loans without minimum monthly payments
Feedback
13.15 One respondent highlighted that some unsecured credit facilities such
as business overdrafts and term loans do not have minimum payments, and
asked whether the additional disclosure has to be made in relation to such
credit facilities.
MAS Response
13.16 MAS has clarified in the final Regulations and Notices that, where no
minimum payment is required for a revolving unsecured credit facility,
disclosures on (a) the total amount that has to be paid, and (b) the total time
needed to fully repay the loan, if only minimum payment is made each month,
do not have to be made.
Whether FIs have the flexibility to adjust the disclosure format to take into account their technical limitations
Feedback
13.17 One respondent suggested that FIs be allowed the discretion to modify
the disclosure format so as to allow for technical limitations that FIs may face,
provided that the required information is disclosed.
MAS Response
13.18 The disclosure format is meant to be standardised across the industry.
Nevertheless, FIs have the flexibility to provide further information in the
disclosure template, for example, a warning that the borrower’s credit card is
likely to be cancelled if it becomes past due for 30 days or more.
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14 REPORTING REQUIREMENTS IN NOTICES 759 AND 760
Reporting of balances data in Notices 759 and 760
Balances of borrowers whose accounts have been suspended because of
the 60 days past due rule or the 12 months’ income limit
Feedback
14.1 One respondent asked whether the outstanding balances of borrowers
whose accounts have been suspended because of the 60 days past due rule or
the 12 months’ income limit should be reported based on the balances
outstanding as at the end of the relevant reporting period.
MAS Response
14.2 Yes, the balances reported should be the balances outstanding as at the
end of the relevant reporting period.
Definition of free credit balances
Feedback
14.3 One respondent asked whether free credit balances refers to all
balances as at the end of the reporting quarter that are non-interest-bearing,
including new billings, balances on 0% promotional rates and balances on
interest-free instalment plans.
MAS Response
14.4 Free credit balances refer to all balances that accrue an effective
interest rate of zero.
Methodology for aging of interest-bearing balances
Feedback
14.5 One respondent sought clarification on the methodology for the aging
of interest-bearing balances for the purpose of MAS Notices 759 and 760.
Specifically, the respondent asked if the age of the balances in the following
two illustrations, as at 31 March, should be 58 days:
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Illustration 1:
Date Transactions Balance
1 February $1,000 Dr $1,000 Dr
20 March $2,000 Dr $3,000 Dr
31 March - $3,000 Dr
Illustration 2:
Date Transactions Balance
1 Feb $1,000 Dr $1,000 Dr
20 Mar $2,000 Dr $3,000 Dr
25 Mar $1,000 Payment
$2,000 Dr
31 Mar - $2,000 Dr
MAS Response
14.6 In both the illustrations above, assuming that interest starts accruing
on 2 February, the age of the respective balances should be counted from 2
February, i.e. 58 days (between 2 February and 31 March). The fact that
partial payment has been made in the interim does not affect the computation
of the age of the balances. Time is only reset when no part of the outstanding
balance accrues interest.
Instalment loans
Feedback
14.7 Given that “free credit balances” and “interest-bearing balances” have
to be reported separately, it was asked how FIs should treat accounts such as
instalment loans on card and balance transfers, which include an inherent
interest in the instalment amounts billed to borrowers. Another respondent
asked how an instalment loan (including unbilled amounts) should be
reported, if interest is only charged on the instalment that is overdue and not
the unbilled amounts.
MAS Response
14.8 Where any part of the instalment loan attracts interest, the entire
balance (including unbilled amounts) should be reported as “interest-bearing
balances”.
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Reporting requirements in MAS Notice 759
Billings of foreign cardholders in Singapore
Feedback
14.9 One respondent sought clarification on the definition of the data field
“Billings of foreign cardholders in Singapore”.
MAS Response
14.10 The billings of foreign cardholders in Singapore refers to the amounts
spent by foreign cardholders, such as a cardholder from the United States
holding a card issued by a US bank, in Singapore. Data may be available from
the acquiring business of the bank in Singapore. This is an existing data field in
MAS Notice 759.
Billings of foreign cardholders in Singapore
Feedback
14.11 One respondent sought clarification on the definition of the data field
“Total credit facilities extended under unsecured credit facilities linked to debit
cards”.
MAS Response
14.12 For active accounts and accounts that have been temporarily
suspended, credit limits should be reported under this data field. For accounts
that have been permanently suspended, outstanding balances should be
reported.
Whether balances of borrowers whose accounts have been suspended
due to the 12 months’ income limit have to be reported
Feedback
14.13 The draft revised MAS Notice 759 clarified that credit cards which are
not available for further use and which have no outstanding balances should
not be reported. One respondent asked whether cards that have been
suspended due to the 12 months’ income limit being breached, and which
have no balances outstanding, have to be reported.
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MAS Response
14.14 Cards that have been suspended due to the 12 months’ income limit
should be reported, as these cards can be used once the borrowers reduce
their cumulative total outstanding unsecured amounts to less than 12 months
of their income (and after the required income and credit bureau checks are
conducted).
Cards under restructuring action
Feedback
14.15 One respondent asked whether cards under restructuring action in
rows 11a and 12a of Table 4 in the draft revised MAS Notice 759 refer to cards
that have been restructured following from their suspension due to the 60
days past due rule or 12 months’ income limit, and whether the balances and
number of customers under such restructuring action should be reported
based on the number of restructured loans set up over the reporting quarter.
Clarification was also sought as to how accounts suspended due to both the 60
days past due rule and the 12 months’ income limit should be reported, and
whether restructured accounts should be reported under row 10a of Table 4 as
well.
MAS Response
14.16 MAS has simplified the final MAS Notice 759 to require reporting of
individuals who are suspended due to the 60 days past due rule or 12 months’
income limit, and their total unsecured outstanding amount in Table 7, instead
of under Tables 3B, 4, 5A, 5B and 6. Individuals whose cards are suspended
due to both the 60 days past due and 12 months’ income limit should be
reported under rows 1 and 1a (where such cards/facilities are restructured) of
Table 7 in the final MAS Notice 759.
14.17 The reporting for “restructuring action” that remains in Tables 3, 4, and
6 is an existing requirement, which refers to all individuals who are past due
and whose facilities are restructured. These individuals are not limited to and
may overlap with the group of individuals who are suspended due to the 60
days past due rule or 12 months’ income limit.
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Balances of exempted cards issued under regulation 6(2A) and (2B)
Feedback
14.18 One respondent sought clarification on the data to be reported under
“Value” in Table 5A of the draft revised MAS Notice 759, in relation to
exempted credit cards and charge cards issued under regulation 6(2A) and (2B)
of the draft revised Credit Card Regulations.
MAS Response
14.19 The “Value” to be reported is specified in each row of Table 5A. For
example, the total outstanding balance as at the end of the reporting quarter
on cards held by individuals with cards issued under regulations 6(2A) and (2B)
of the draft revised Credit Card Regulations is to be reported under row 2.
Reporting requirements in MAS Notice 760
Borrowers with multiple unsecured credit facilities
Feedback
14.20 One respondent asked for clarification as to how a borrower who has
two unsecured credit facilities, with minimum payments being made on one
but not the other, should be reported under MAS Notice 760.
MAS Response
14.21 FIs should take the “worse-off” scenario and report the individual and
the outstanding balances of all his unsecured credit facilities under the row
where minimum payments are not made.
Computation of days in arrears
Feedback
14.22 One respondent asked whether an unsecured credit facility that was 30
days past due and restructured, but subsequently defaulted on again a year
later, should be considered to have been in arrears for 30 + 365 days = 395
days.
MAS Response
14.23 Yes, such a facility should be considered to have been in arrears for 395
49
days.
Borrowers who hold both cards and unsecured credit facilities
Feedback
14.24 One respondent sought confirmation that the column “Number – also
reported under MAS Notice 759” in Table 1B refers only to borrowers who
have been granted both an unsecured credit facility and a credit card.
Conversely, “Number – SC/PR” refers to all borrowers who have been granted
an unsecured credit facility, regardless of whether the facility is revolving and
whether they have also been granted a card.
MAS Response
14.25 The final MAS Notices 759 and 760 clarify that individuals and amounts
reported under Table 7 of MAS Notice 759 need not be reported in Table 5 of
MAS Notice 760. Thus, only individuals who do not hold any credit card,
charge card, or debit card linked to an unsecured credit facility, need to be
reported in Table 5 of MAS Notice 760.
Vintage data for unsecured credit facilities
Feedback
14.26 One respondent sought confirmation that Table 3 in Part II of the draft
revised MAS Notice 760 should include all approved amounts, regardless of
whether the facility has been drawn down, while Table 4 would only include
amounts that have been drawn down. Table 3 would therefore show total
limits, while Table 4 would show total balances.
14.27 Confirmation was also sought that Tables 3 and 4 would include the
number and value of all open or valid unsecured credit facilities, segmented by
the period of their approval. Unsecured credit facilities (and the balances
thereof) that have been charged off or restructured should be excluded from
Tables 3 and 4, but facilities that have outstanding balances should be included
even though they are no longer available for further use.
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MAS Response
14.28 Yes, Table 3 should show total limits (which would include total
balances and total amount of additional credit allowed), while Table 4 should
show total balances.
14.29 Tables 3 and 4 should include the number and value of all open or valid
unsecured credit facilities. Facilities that have outstanding balances should
also be included, even if they are no longer available for further use. Charged
off or restructured facilities and the balances thereof, however, should be
excluded from Tables 3 and 4.
15 IMPLEMENTATION TIMELINE
Rules taking effect on 1 Dec 2013
Whether it is feasible for certain rules to take effect on 1 Dec 2013
Feedback
15.1 One respondent asked if it was feasible to have Proposals B, C, I, and J
(as referred to in the consultation paper issued on 21 December 2012) and the
extension of requirements on solicitation, and income and credit bureau
checks to excluded unsecured credit facilities such as business loans,
renovation loans, medical loans and education loans solicitation, income and
credit bureau checks, take effect from 1 December 2013.
MAS Response
15.2 MAS is of the view that the rules can be implemented with effect from
1 December 2013, for the reasons set out in the table below:
Table 2: Feasibility of 1 Dec 2013 as the effective dates of certain rules
Rule Reasons for which immediate implementation (i.e. with effect from 1 December 2013) is feasible
Require FIs to conduct credit bureau and income checks before increasing credit limits.
Industry feedback reveals that most FIs are already conducting some form of credit assessments before increasing credit limits.
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Rule Reasons for which immediate implementation (i.e. with effect from 1 December 2013) is feasible
Require FIs to conduct credit bureau and income checks when information that calls their borrowers’ credit-worthiness into question is received.
Such alerts are not commonly received. The checks required are also not onerous, and no different from checks required for new applications.
Allow FIs to grant credit cards to individuals above 55 years of age who meet any one of the following criteria: (i) annual income of at least
$15,000;16 (ii) total net personal assets
exceeding $750,000; (iii) guarantor with annual income
of at least $30,000.
This is a liberalisation of the existing credit card rules. FIs are free to choose not to utilise the additional flexibility granted.
Extend requirements on solicitation, and income and credit bureau checks to micro-credit cards.
The requirements are no different from those which already apply to all other credit cards.
Extend requirements on solicitation, and income and credit bureau checks to excluded unsecured credit facilities such as business loans, renovation loans, medical loans and education loans.
The requirements are no different from those which already apply to all other unsecured credit facilities, and are also not overly onerous.
Rules taking effect on 1 Jun 2015
Effective date of 12 months’ income limit
Feedback
11.16 One respondent stressed that the implementation of the 12 months’
income limit is dependent on the credit bureaus, and requested a further 12 to
18 months, from the time the credit bureaus’ systems are ready, to implement
the limit.
16
Under the current rules, individuals above 55 years of age qualify for unsecured credit cards only if they have annual incomes of at least $15,000.
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MAS’ Response
11.17 The 12 months’ income limit will only take effect on 1 June 2015, 12
months after aggregate outstanding balances data becomes available in the
credit bureaus on 1 June 2014. FIs are therefore in fact allowed 12 months,
from the time the credit bureaus are ready, to implement the 12 months’
income limit.
Reporting requirements
Effective date of the revised reporting requirements
Feedback
17.1 It was submitted that the updated data returns notices (MAS Notices
759 and 760) be effective from the quarter ending December 2014, instead of
June 2014, to allow more time to effect the necessary system enhancements.
It was further requested that the new data items relating to the 60 day past
due rule and industry-wide limit of 12 months’ income be collected only from
the quarter ending Dec 2015.
MAS Response
17.2 MAS appreciates that a number of system changes are required for FIs
to implement the new rules and thus is agreeable to effecting the new data
items relating to the 60 days past due rule and the 12 months’ income limit
from the quarter ending September 2015, and for other items in the final MAS
Notices 759 and 760 with effect from the quarter ending December 2014.
Monetary Authority of Singapore
29 November 2013
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Annex
16 TABLE 3: APPLICATION OF CREDIT CARD REGULATIONS TO CORPORATE AND BUSINESS CARDS
Policy Corporate/business card, where the cardholder has
no personal liability
Corporate/business card with personal liability issued to employees
Business card issued to owners of sole proprietorships and
partnerships (not being LLPs)
Existing rules
1 Minimum income requirements of $15,000 (for above 55 years old)/ $30,000 (for 55 years old and below)
Exempted
Applicable Exceptions granted for period of overseas travel.
Applicable Exceptions granted for period of overseas travel, and for corporate purchasing cards (i.e. cards used only for business purposes where no entertainment expenses are charged).
2 Maximum credit limit of 2/4 months’ income
Exempted
3 Solicitation (consent before sending cards)
Applicable Applicable Exceptions granted for corporate purchasing cards.
4 Disclosure of interest and charges
5 Credit bureau checks for new applications
New rules
6 Review outstanding balances and credit limits extended across FIs in credit bureau checks.
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Policy Corporate/business card, where the cardholder has
no personal liability
Corporate/business card with personal liability issued to employees
Business card issued to owners of sole proprietorships and
partnerships (not being LLPs)
7 Conduct credit bureau and income checks before increasing credit limits.
Exempted
Applicable
Applicable Exceptions granted for corporate purchasing cards.
8 Conduct checks when alerted that borrowers may be less creditworthy.
9 Disclose how debt accumulates if only minimum payment is made and if none is made.
10 Obtain cardholder’s consent before increasing credit limit.
11 Allow applicants to indicate preferred credit limit.
12 Suspend cards when individual is 60 days or more past due on any card and unsecured credit facility extended by the FI. Exempted
13 Suspend cards when individual accumulates unsecured debt across FIs exceeding 12 months’ income for 3 months or more.