We refer to the article “Singapore consumer credit situation is in a healthy state: Tharman” (Straits Times, Oct 28).

Consuner credit situation is healthy?

It states that “The consumer credit situation in Singapore is on the whole in a healthy state, said Finance Minister Tharman Shanmugaratnam on Tuesday at an event to mark the Credit Counselling Singapore’s (CCS’s) 10th anniversary.”

64% more people seek counselling?

– If the situation is indeed “in a healthy state” – which is of course a subjective word – then why is it that “More people have been seeking help to clear their debts as the amount owed rose significantly. For the first eight months this year, 1,509 people sought help from CCS.

It is more than double the average number of 650 debtors who sought help annually from CCS in the first five years of its existence from 2004 to 2008.

This year’s figure is also above the average number of 1,377 who sought help annually in the last five years from 2009 to 2013”?

At this rate, does it mean that the number for the whole of this year may be about 2,264 (1,509 divided by 8 times 12 months)?

If so, then the increase over the average for the last 5 years may be about 64% (2,264 divided by 1,377).

Average outstanding debt increased 22%?

Also, how “healthy” is the state, when “The amount owed has also risen substantially over the years, with the average outstanding debt owed by distressed debtors who sought help at CCS growing to $94,765 in the first eight months this year, up 22 per cent from the average amount of $77,807 owed in 2004”?

3% of borrowers’ debts exceed their annual incomes?  

With regard to “noted that there is a small group of borrowers who have incurred unsustainable credit card and unsecured debts. MAS estimates that about 3 per cent of unsecured credit borrowers have accumulated unsecured debts that exceed their annual incomes”

– How many people are we talking about? – 10,000, 20,000, 30,000?

“Time bomb” – June 2015?

The report on the same event – “More likely to seek help under new unsecured credit rules” (Channel NewsAsia, Oct 28), may have arguably, been much better reporting in our view, as it may have highlighted the impending “time bomb” that may explode in June next year.

– “More borrowers are expected to seek financial counselling after new unsecured credit rules take effect next year, said Credit Counselling Singapore’s president, Mr Kuo How Nam, at an event on Tuesday (Oct 28) to mark the organisation’s 10th anniversary.

Under the new regulations, individuals exceeding the new limit of their annual income will have their total facilities frozen and be unable to borrow more unless they pay back any excess above the regulatory limit.

Changes to regulations regarding unsecured lending in Singapore were announced in September last year, while the limit to annual income for all unsecured outstanding loans take effect in June 2015.

Average debtors owe 28 months?

Credit Counselling Singapore says the average debtors annual disposable income is about S$3,000, while debtors would usually owe financial institutions about S$84,000, which represents 28 months of their disposable income”.

Financial stress?

– Can you imagine what may happen when all these “óver annual income” debtors have their credit frozen and are unable to access any credit at all from June next year?

They may be extremely stressed financially as their cashflows may become critically acute.

Will some turn to loan sharks?

A “healthy state”?

Whilst we are on the subject of how healthy is the state – according to the article “More people missed credit card payments last year: Credit Bureau” (Channel NewsAsia, Apr 21)

More people can’t pay?

– “ A larger number of people in Singapore missed payments on their credit card bills last year as average card balances increased across all age groups, Credit Bureau Singapore (CBS) said on Monday.

According to CBS, 14.64 per cent of consumers missed at least one payment on their credit card accounts last year, up from 13.54 per cent in 2012. The figure was 12.55 per cent in 2011.”

– As we believe that there may be about 2 million credit card holders, out of the 8.1 million main cards and 1.6 million supplementary cards in Singapore

300,000 people can’t pay?

– does it mean that about 300,000 people did not or could not pay even a single cent on their outstanding credit card balance, for at least one month?

Isn’t this a very alarmingly large number of people?

24% interest plus penalty fees?

Moreover, when you miss a month or more on your credit card balance – you get charged typically about 24% interest a year plus a penalty charge of say $50 every month.

$250m bad debts written off?

Also, we understand that the above figures may not fully reflect the fact that $250.1 million of bad debts were written off in just the last 12 months.

So, the alarmingly large figures may actually be even worse.

As to “CBS also said average balance increased across all age groups, with men and women aged between 45 and 49 topping the spending chart with an average monthly balance of S$6,577 on all their credit cards.

The average balance per consumer was S$5,304 last year – a rise of 4.17 per cent over 2012.

The average balance refers to the amount spent on credit cards plus rollovers and financial charges.”

$5,5b rollover balance?

– It may be even more alarming that according to the Ministry of Finance’s statistics – Rollover Balances have increased by about 8%, from $5.1 to $5.5 billion in the last 12 months (as of April 2014).

S Y Lee and Leong Sze Hian

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