RELAXATION ON SUPPLEMENTARY CREDIT CARDS

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RELAXATION ON SUPPLEMENTARY CREDIT CARDS: 10.

Dr Amy Khor Lean Suan asked the Deputy Prime Minister and Minister for Finance what is the rationale for the recent relaxation on supplementary cards by the Monetary Authority of Singapore in the light of the recent concern over mounting credit card bad debts and calls for more prudence in spending.

The Deputy Prime Minister and Minister for Finance (Mr Lee Hsien Loong): Mr Speaker, Sir, there is no relaxation in the availability of credit to individuals. The recently released regulations on credit and

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charge cards preserve the fundamental objective of discouraging Singaporeans from spending beyond their means by curbing the easy availability of consumer credit.

We have removed the limit of two supplementary cards per principal card account. Feedback from card issuers showed that, in practice, the limit has had an unintended effect. Because of the limit, a cardholder who wishes to have more than two supplementary cards tied to his account will need to apply for an additional card from another issuer. As a result, the overall credit available to the cardholder is raised. Therefore, lifting the limit will remove this unintended outcome, while keeping the overall credit limit available to the cardholder unchanged. In any event, a cardholder should exercise discretion when applying for supplementary cards tied to his account, since he is liable for charges incurred by the supplementary cardholders.

We have also allowed a credit or charge card issuer to issue additional cards to its existing principal cardholders without first having received an application. However, there should be no increase in the credit limit granted to the cardholder. For the cardholders' protection, the cardholder must first notify the issuer that he accepts the use of the additional card and its accompanying terms and conditions. Otherwise, the cardholder will not be liable for any amount charged to the card.

Mr Steve Chia Kiah Hong: Sir, in view of the rising importance of Internet e-commerce, should not lower income earners also be allowed

to own at most one credit card, even if their income falls below the $30,000 minimum? Would the Minister agree with me that allowing lower income earners to have one credit card with only two times the monthly salary credit line is more prudent than having a minimum $30,000 income

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criterion but owning many credit cards with many different banks? Should the minimum income qualification not be waived and the maximum amount of cards allowed, based on the income level, be more prudent?

Mr Lee Hsien Loong Loong: Mr Speaker, Sir, there are two parts to the question. One for Internet e-commerce, you can do the business without a credit card because you can do it with a debit card. It functions in the same way, except that your account is debited straightaway and there is no credit extended by your bank. And the second question on whether we should not allow lower income individuals to have credit cards and that this is a lower risk than having a $30,000 income individual having many many credit cards, the practical answer is this. We would like to prevent a person from being imprudent with his own money because it gets him into trouble and he has a lot of difficulties, and if we can have him avoid going into debt, I think we save him some trouble for himself. But it is not easy for us to restrict the amount of total borrowing which a person can have because he can borrow from one bank and another bank, one credit card, another credit card source, and even an overseas credit card source. So, what we have said is if you have $30,000 of income, you have one credit. Then, when you borrow on each credit, the credit limit is two months of income. But, we have not been able to find a way to say you are not allowed to get credit from more than one bank.

So, effectively, what we have said is if you have $30,000 of income, we try to make it more difficult for you to be imprudent, but the onus is on you really to look after yourself. If you have below $30,000 of income, then we do not think that the credit card is a wise avenue to open up for this group of people. And that is where we are. It is not an entirely ideal arrangement but it is the best way we have. MPs will know from their meet-

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the-people sessions that people who have gotten into trouble because they borrow imprudently are a real problem, and many of them will benefit from our policy.

Dr Amy Khor Lean Suan Suan: Sir, could not the issue of a borrower having too many credit cards and therefore getting into trouble be handled by the credit bureau?

Mr Lee Hsien Loong Loong: In principle, it can be done. In practice, we have to look at it. It is quite intrusive and burdensome. We have not yet decided that we need to intervene to this extent. I think if the problem gets worse, we would revisit that question.