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    Oct 29, 2014

    One-stop repayment plan for debtors

    CREDIT Counselling Singapore (CCS) will offer a centralised repayment system to borrowers with debts owed to several banks from next year.

    This was announced by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam yesterday at the CCS' 10th anniversary luncheon. Mr Tharman is also chairman of the Monetary Authority of Singapore (MAS).

    CCS will coordinate with all the banks that are owed money by a borrower, and create a centralised repayment plan for him. This will take into account the borrower's income, spending needs and loan obligations.

    The Association of Banks in Singapore said yesterday that financial institutions will contact such customers with repayment plan details in the first quarter of next year. It said that customers are encouraged to update their income records with their respective banks.

    The announcement comes at a time when more debtors are seeking help from CCS.

    CCS said the average number of debtors seeking help annually went from 650 in its first five years (2004 to 2008) to 1,377 in the last five years (2009 to 2013).

    For the first eight months of this year, CCS counselled 1,509 people.

    However, CCS president Kuo How Nam said the statistics did not mean that Singapore's debt situation was worsening.

    Instead, he attributed the increase in the number of individuals seeking the organisation's help to the expansion in loans base and a greater awareness of CCS' services.

    MAS also estimates that about 3 per cent of unsecured-credit borrowers have accumulated unsecured debts exceeding their annual income, said Mr Tharman.

    He said close to 65 per cent of these individuals earn incomes above the median, and more than half have tertiary-education qualifications.

    The common reason for falling into debt problems is overspending, said Mr Tharman. "The temptation to splurge occurs across all income groups."

    CCS said other common reasons people get into debt are retrenchment or a pay cut.

    Mr Kuo said that the average outstanding debt under CCS' restructuring programme is $84,000 per debtor.

    The average disposable income of such distressed debtors is about $3,000, which means their debt is about 28 months of their disposable income. From CCS' data, these debtors typically owe money to an average of seven banks and financing firms.

    "Such people have been able to build up such huge debts simply by borrowing more and more from banks," he said.

    The average outstanding debt owed by distressed debtors who sought CCS' help has also grown 22 per cent, from $77,807 in 2004 to $94,765 in the first eight months of this year.

    Mr Kuo added that growth in average outstanding debt is a function of rising income, in line with the rise in expenditure.

    "Consumer loans have definitely increased over the years. The important indicator to watch is the banks' write-off figure for credit cards. This has been consistent at around 5 per cent of credit card rollover balances," he said.