It indicates more people are unable to meet payments as crisis worsens
By Gabriel Chen 3 November 2008
Debt collectors in Singapore are seeing more consumer debt submitted to them for collection - and they foresee more consumers being unable to pay up if the global financial crisis deepens.
It is the first sign that the crisis has hit home with credit-card users in Singapore, financial experts say.
Ms Chen Yew Nah, managing director of DP Information Group, which has a debt collection arm, said its consumer debt cases more than doubled from March to last month, while the total sum collected was up 20 per cent over the same period.
‘We have already detected a downturn in consumer repayment behaviour as a result of the credit crisis,’ she said.
‘We foresee a greater and more visible impact on defaults and rollover amounts in the coming months. This would be due to greater job losses and general negative consumer sentiment.’
Debt collectors visit the homes and offices of credit-card users to try and personally recover debts overdue.
Banks and other financial institutions that provide credit call on collectors as a last resort, especially when phone and e-mail reminders to pay up are ignored.
An increase in debt collection cases therefore signals that more customers are unable to meet their credit card payments.
Ms Chen identified three main groups of affected consumers: those who lose their jobs suddenly, those who are stricken with ill health leading to an immediate drain on their finances, and those weighed down by excessive debt.
During the Asian financial crisis a decade ago, it was the first group, those who lost jobs, who felt the heat on credit-card debt, she said.
‘When you see unemployment going up, it’s more worrying. It’s this next stage we’re looking at, and I suspect there’ll be more to come in terms of percentage of non-payments.’
Financial advisers added that, anecdotally, they are seeing more cases of financial stress among cash-strapped individuals.
‘A year ago, about 30 per cent of cardholders were rolling over their balances, but now about 40 per cent of cardholders are rolling over every month,’ said Mr Leong Sze Hian, president of the Society of Financial Service Professionals.
He said that while some people choose to roll over balances to ‘finance their lifestyles’, others are unaware of the consequences that can leave a hole in their pockets.
Credit-card issuers here typically charge an interest rate of 24 per cent a year when full payment is not made by the due date and on cash advances.
The good news is that official delinquency and default figures are not yet rising significantly, a check with Credit Bureau Singapore showed.
Default accounts are those closed with outstanding balances or written off as bad debt, while delinquent accounts are those that are 30 or more days past due.
Still, the fact that there has been no noticeable rise in defaults or delinquency does not mean things will not get worse in future, said the bureau’s executive director, Mr William Lim.
‘If employment numbers change, that will likely have an impact on delinquency. The situation will be exacerbated with low growth and if inflation figures are not contained. However, the impact will not be immediate and will likely take place only next year,’ he said.
The credit crunch is being felt in countries like the United States, where the national passion for shopping with plastic is taking a hit as card issuers cut back on card offers, tighten standards for applicants, and curtail sky-high credit lines they had splashed out for years.
The New York Times reported recently that some lenders are even pulling credit lines after monitoring cardholders who shop at the same stores as other risky borrowers, or who have mortgages from certain companies.
In Singapore, banks contacted said they are not doing anything of that sort yet. They added that they use a ‘robust system’ of credit processes and policies in assessing all credit-card applications.
Citibank Singapore’s head of portfolio management and sales, Ms Jacquelyn Tan, said the bank has always adopted a prudent approach towards lending.
‘Any application for credit undergoes a rigorous credit review process that assesses a potential borrower’s ability to repay,’ she said.
Mr Dennis Khoo, Standard Chartered Bank’s general manager of lending, said the bank would work with customers who have difficulties in meeting repayments on a case-by-case basis.
1 comment:
Debt agents calling on more credit card users
It indicates more people are unable to meet payments as crisis worsens
By Gabriel Chen
3 November 2008
Debt collectors in Singapore are seeing more consumer debt submitted to them for collection - and they foresee more consumers being unable to pay up if the global financial crisis deepens.
It is the first sign that the crisis has hit home with credit-card users in Singapore, financial experts say.
Ms Chen Yew Nah, managing director of DP Information Group, which has a debt collection arm, said its consumer debt cases more than doubled from March to last month, while the total sum collected was up 20 per cent over the same period.
‘We have already detected a downturn in consumer repayment behaviour as a result of the credit crisis,’ she said.
‘We foresee a greater and more visible impact on defaults and rollover amounts in the coming months. This would be due to greater job losses and general negative consumer sentiment.’
Debt collectors visit the homes and offices of credit-card users to try and personally recover debts overdue.
Banks and other financial institutions that provide credit call on collectors as a last resort, especially when phone and e-mail reminders to pay up are ignored.
An increase in debt collection cases therefore signals that more customers are unable to meet their credit card payments.
Ms Chen identified three main groups of affected consumers: those who lose their jobs suddenly, those who are stricken with ill health leading to an immediate drain on their finances, and those weighed down by excessive debt.
During the Asian financial crisis a decade ago, it was the first group, those who lost jobs, who felt the heat on credit-card debt, she said.
‘When you see unemployment going up, it’s more worrying. It’s this next stage we’re looking at, and I suspect there’ll be more to come in terms of percentage of non-payments.’
Financial advisers added that, anecdotally, they are seeing more cases of financial stress among cash-strapped individuals.
‘A year ago, about 30 per cent of cardholders were rolling over their balances, but now about 40 per cent of cardholders are rolling over every month,’ said Mr Leong Sze Hian, president of the Society of Financial Service Professionals.
He said that while some people choose to roll over balances to ‘finance their lifestyles’, others are unaware of the consequences that can leave a hole in their pockets.
Credit-card issuers here typically charge an interest rate of 24 per cent a year when full payment is not made by the due date and on cash advances.
The good news is that official delinquency and default figures are not yet rising significantly, a check with Credit Bureau Singapore showed.
Default accounts are those closed with outstanding balances or written off as bad debt, while delinquent accounts are those that are 30 or more days past due.
Still, the fact that there has been no noticeable rise in defaults or delinquency does not mean things will not get worse in future, said the bureau’s executive director, Mr William Lim.
‘If employment numbers change, that will likely have an impact on delinquency. The situation will be exacerbated with low growth and if inflation figures are not contained. However, the impact will not be immediate and will likely take place only next year,’ he said.
The credit crunch is being felt in countries like the United States, where the national passion for shopping with plastic is taking a hit as card issuers cut back on card offers, tighten standards for applicants, and curtail sky-high credit lines they had splashed out for years.
The New York Times reported recently that some lenders are even pulling credit lines after monitoring cardholders who shop at the same stores as other risky borrowers, or who have mortgages from certain companies.
In Singapore, banks contacted said they are not doing anything of that sort yet. They added that they use a ‘robust system’ of credit processes and policies in assessing all credit-card applications.
Citibank Singapore’s head of portfolio management and sales, Ms Jacquelyn Tan, said the bank has always adopted a prudent approach towards lending.
‘Any application for credit undergoes a rigorous credit review process that assesses a potential borrower’s ability to repay,’ she said.
Mr Dennis Khoo, Standard Chartered Bank’s general manager of lending, said the bank would work with customers who have difficulties in meeting repayments on a case-by-case basis.
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