The Banking (Credit Card and Charge Card) Regulations 2013 (“Regulations”) were amended with effect from 1 December 2013. Amendments to the following related Notices were also issued on the same day by the Monetary Authority of Singapore (“MAS”):

• MAS Notices 118, 635, 827, and 1109 (Unsecured Credit Facilities to Individuals);
• MAS Notices 116, 633, 826, and 1107 (Bridging Loans for the Purchase of Immovable Properties);
• MAS Notices 603 and 759 (Branches, Places of Business and Automated Teller Machines); and
• MAS Notice 760 (Collection of Statistical Returns for Unsecured Credit Facilities).

The Regulations were issued pursuant to public consultations carried out by the MAS on 12 December 2012 (Consultation Paper on Proposed Changes to Credit Cards and Unsecured Credit Rules) and on 11 September 2013 (Consultation Paper on Draft Amendments to Credit Cards and Unsecured Credit Rules). The Regulations imposed various new obligations that take effect from different dates. The Update looks only at the Regulations, and specifically, those obligations that will come into effect as from 1 June 2014 and 1 June 2015. Where relevant, it will also note clarifications made by the MAS in its response to feedback to the Consultation Paper on Draft Amendments to Credit Cards and Unsecured Credit Rules (“Response”).

Obligations That Came into Effect on 1 December 2013

The amendments to the Regulations that came into effect on 1 December 2013 are briefly listed below:

• Financial institutions that issue credit or charge cards (“card issuers”) must conduct credit bureau and income checks:
  • Before increasing credit limits, unless such checks have been performed within the preceding one month and three months respectively; and
  • Upon receiving information that calls their borrowers’ credit-worthiness into question.
• Card issuers must extend existing solicitation and credit bureau checks rules to credit cards with credit limits of $500 or less.
• Card issuers must extend all rules, save for the minimum income eligibility criteria, regulatory credit limits per financial institution, and the 12 months’ income industry-wide limit, to unsecured loans (e.g., business loans, renovation loans, medical loans, education loans) that are currently exempted from unsecured credit rules.
• Card issuers may grant credit cards to individuals above 55 years of age who meet any one of the following criteria:
  • Annual income of at least S$15,000;
  • Total net personal assets exceeding S$750,000; or
  • A guarantor with annual income of at least S$30,000.
• Financial institutions may exceed the regulatory credit limit of two months’ income/four months’ income per financial institution to refinance debt owed to another financial institution.

Obligations Coming Tnto Effect On 1 June 2014

Card Issuers To Review Borrowers’ Outstanding Debt And Credit Limits in Credit Bureau Checks

The Regulations previously required card issuers to carry out comprehensive checks for the purpose of assessing the credit-worthiness of a person but did not specify what those checks had to cover. As from 1 June 2014, card issuers will be required to review all of the following information when carrying out the required comprehensive checks on a person’s credit worthiness (regulation 12(4) of the Regulations):

• Secured and unsecured amounts outstanding on all credit cards, charge cards, and non-card credit facilities reported to the credit bureaus;
• Secured and unsecured credit limits of all credit cards, charge cards, and non-card credit facilities reported to the credit bureaus; and
• The payment status of all credit cards, charge cards, and non‐card credit facilities reported to the credit bureaus.

The MAS clarified in its Response that, in determining the amounts outstanding, the card issuer must include amounts that are in default and written off unless there is legal certainty to the borrower that the lender will no longer seek repayment of the defaulted amount. This may be the case, 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.

Card Issuers To Obtain Borrowers’ Consent In Writing On The Amount of Credit Limit Increase

The MAS had originally proposed that card issuers should be prohibited from making unsolicited offers of credit limit increases. However, pursuant to feedback, it has amended this proposal: card issuers will not be prohibited from making such offers unsolicited, but will be required to obtain borrowers’ consent on the amount of credit limit increases to be granted before increasing their credit limits. Accordingly, as from 1 June 2014, a card issuer must not increase a cardholder’s aggregate credit limit unless the cardholder has requested for the increase in a document signed by him.

Card Issuers To Request Borrowers To Indicate Their Preferred Credit Limits When Applying For Credit Facilities And Credit Limit Changes

When an individual applies for a credit card, charge card, or change in his credit limit, the card issuer must find out from him his preferred credit limit. This information must be set out in a document signed by him. If he does not do this, he must consent to the credit limit to be granted to him in a document signed by him.

Obligations Coming into Effect on 1 June 2015

Mandated Disclosures where Borrowers Have Not Paid in Full

As from 1 June 2015, if a cardholder has not paid the prior month’s credit card or charge card bill in full by the payment due date set out in the prior month’s bill, the card issuer must provide the following information to him in the next credit card or charge card bill:

• The total amount and time needed to fully pay off his debts if he pays only the minimum payment each month; and
• The amount of debt that would accumulate by the end of six months if he makes no payments in the next six months.

The form of the information is mandated in the Second Schedule of the Regulations.

Suspension of Credit To Individuals Who Are 60 Days Or More Past Due

Card issuers must cease granting further unsecured credit to individuals who are 60 days or more past due on any credit card or unsecured credit facility extended by it. Accordingly, except for fees, interest, and charges (including late payment charges) relating to the use of the credit card or charge card, no additional amounts may be charged. Other financial institutions will also not be allowed to issue new cards or unsecured credit facilities, or grant credit limit increases, to such individuals.

The MAS explained in its Response that 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. It further explained that the requirement to suspend the use of the credit card or charge card also applies where the borrowers are 60 days or more past due on an excluded unsecured credit facility. Hence, for example, the requirement for suspension applies where borrowers are 60 days or more past due on their payments for a renovation loan or medical loan.

The card may only be reactivated when all of the following requirements are met:

• The amounts outstanding on all credit cards and charge cards issued and fully unsecured and partially secured non-card credit facilities granted, to the Singapore cardholder by the card issuer are no longer past due;
• The card issuer obtains the documents specified in the Regulations; and
• The card issuer conducts comprehensive checks for the purpose of assessing the credit-worthiness of the borrower.

Suspension Of Credit To Individuals Whose Aggregate Outstanding Unsecured Debt Exceed 12 Months’ Of Their Incomes For 90 Days or More

Card issuers must cease granting further unsecured credit to individuals whose cumulative total outstanding unsecured amount exceeds his annual income for three consecutive months. The prohibition extends to the grant of any additional credit cards or charge cards and any increase of credit limit. Once the accounts have been suspended, card issuers cannot reinstate access to these accounts until the individuals have reduced their unsecured debt to below 12 months’ income and the card issuers have conducted credit bureau checks and obtained updated income documents.

The MAS has explained in its Response that, in determining the borrower’s aggregate unsecured debt, card issuers may exclude balances that do not attract interest. It provided the following example: Where 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, card issuers are not required to include these unbilled amounts in the computation of the borrower’s aggregate unsecured debt.

The MAS also explained that, in determining a borrower’s annual income, card issuers may rely on their own income records. If another card issuer has suspended a borrower’s accounts, a card issuer whose income records of that borrower indicate that his aggregate unsecured debt has not exceeded 12 months of his income for three months or more does not have to also suspend the borrower’s accounts.

For further information, please contact:

Elaine Chan, Partner, WongPartnership

[email protected]

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