More unsecured debtors miss payments: CBS

SINGAPORE — The number of consumers who missed two or more months of unsecured debt payments has jumped by about a third over the last four years, although the debt exposure has stabilised lately following the introduction of new loan curbs, Credit Bureau Singapore (CBS) data released today (Oct 5) showed.

The escalating household debt problem had prompted the Monetary Authority of Singapore (MAS) to intervene earlier this year, with a limit capping unsecured loans to 24 times’ monthly income taking effect on June 1. The limit will be reduced to 18 times’ monthly income from June 2017 and tightened further to 12 times from June 2019.

At the end of June, 85,352 consumers who held unsecured debt were behind on their payments by two months or more, up 32 per cent from 2011, the CBS data showed. Compared to June last year, the number was up by 10 per cent. These debtors, who hold unsecured debt either in the form of a credit card, overdraft facility or personal loan, represent 5 per cent of the total population of unsecured credit customers.

The spike is taking place even though unsecured debt exposure has stabilised in June, when the average balance per consumer fell to S$7,971 from S$8,018 last year. From 2011, the average balance has risen by 16 per cent.

Mr William Lim, Executive Director, Credit Bureau Singapore said: “While consumers’ outstanding debt remains high, we note that average debt exposure for credit cards and overdrafts is stabilising. This may indicate that the measures put in place by both the regulator and banks to help borrowers pay down their debt are beginning to have an effect on the market.”

Credit Counselling Singapore (CCS) said the increase in delinquency is not a result of a larger loan base, and put it down to two reasons.

Mr Kuo How Nam, president of CCS, said: “Since the beginning of the year, banks are in possession of better credit information vis-a-vis the total unsecured borrowings of a customer which they never had before in the past. This has now allowed them to identify their more vulnerable customers and those most at risk. They have been reviewing, curtailing, suspending and recalling the facilities of these clients.”

“Since June, customers with unsecured balances of more than 24 times their income consecutively for more than three months will have their entire credit facilities suspended and they will be asked to reduce their outstanding balances. This affects the former group of hard-pressed debtors and in addition places stress on the customers whose facilities are suspended,” he added.

The MAS and banks said they have been taking steps to encourage consumers to spend within their means and urged over-extended borrowers to take up repayment plans.

“MAS’ unsecured credit rules have been enhanced to assist individuals in making better borrowing decisions and to avoid getting into unsustainable debt. While the vast majority of borrowers continue to manage their debt well, a small segment remains vulnerable,” said an MAS spokesperson.

“Borrowers who require assistance in paying down their unsecured debt balances are encouraged to seek help from the various assistance measures and repayment plans offered by individual financial institutions, Credit Counselling Singapore and the Insolvency Office under the Ministry of Law,” she added.

Mr Kenneth Tan, Head, Portfolio and Regional Business for OCBC, said a plan will be structured for those who need help in repayments, although he noted that the bank has not seen a spike in its customers who missed payments by two months or more.

Mr Anthony Seow, Head of Cards & Unsecured Loans, at DBS Bank, said: “Our number of bad debts is in line with the industry trend.” He added that the bank also works with customers to use repayment plans to bring their outstanding balances down to manageable levels.