Debt restructuring programme in the works


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29/11/2014

Credit Counselling Singapore plans to collaborate with the Moneylenders Association to create a debt restructuring programme for those who borrow from licensed moneylenders, according to media reports.

At present, banks have implemented this type of programme, but licensed moneylenders have yet to follow suit.

Notably, moneylenders only account for about one percent of the overall consumer credit in the republic. This amount is miniscule, but problems arise when borrowers take out loans from multiple moneylenders due to dire financial circumstances.

“Usually for many people, by the time they get to that stage, they would also be in debt with the banks. You may call it the end of a borrowing process. They have now maxed-out with the banks. They then go to the moneylenders, they are maxed-out as well,” said Credit Counselling Singapore’s President Kuo How Nam.

In fact, ten to 15 percent of the organisation’s clients obtain loans from both moneylenders and financial institutions.

However, the problem is getting the moneylenders’ consent on the provisions of this debt restructuring programme, as there about 200 moneylenders here with very different business policies.

Nevertheless, this programme offers some benefits as having a restructuring programme can help moneylenders get their loan back “rather than seeing the whole loan go up in smoke,” noted Kuo.

“I can see there’re a lot of advantages here because first of all, the amount that they lend out is actually very small. Collecting a delinquent debt is very, very costly – in terms of time, in terms of legal costs as well – and many people will take advantage of the inability of moneylenders to really pursue them because of the small amount,” he added.

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