Monday, January 19, 2009

Time to stop predatory lending....and miscellaneous thoughts...

LATEST UPDATE: US Congress acts against abusive lending [Link]
Very interesting news over the weekend about how our esteemed govt is tightening laws on protests to prevent any harm to our society. Although countries like S. Korea, Malaysia and many around the world have allowed protests without seeing any violence, Singapore has chosen to pre-emptively enact laws because our extraordinary govt is extremely concerned about our well being. It is because our govt is so extraordinary in caring for us that I urge them to do something for the ordinary people of Singapore - something they might have is time to stop predatory lending!

If you're familiar with the work of Harvard Professor Elizabeth Warren (she does very interesting work look her up on the web), allowing banks to charge beyond 20% in credit card interest rates will lead to something known as predatory lending. Banks will be willind to lend to people who will struggle to pay and will impose hefty fees for late payments. This will eventually lead to a debt trap in which a large number of people in the population struggle to service their loan. The harm to society is great....yet our govt is more concerned about imposing laws to repress protests because it hurts them politically instead doing what is good for Singaporeans. Rollover credit card debt has increased to record levels as Singaporeans borrow to cover their household expenses in this recession. Our banks have learnt "American style" predatory banking by imposing all sorts of fees, charges etc on unsecured loan causing fees, interest, charges to go up to near 30% per annum.

The Malaysian govt and many around the world have recognised this harmful trend 3 years ago and has limited interest chargeable to 15% [Link]. Studies have shown that at around this level predatory lending can be curbed. Predatory lending has caused plenty of harm to people, society and economies (just look at what happened in US, UK) yet nothing has been done about it in Singapore. However, every single major positive transformation in society (women's rights, racial equality, etc) has been brought about by protests yet the PAP govt introduces more laws to curb it. They tell us it is for our own good to prevent social disorder.....but we know why they did it. 3-4 powerless protestors caused plenty of embarassment to the PAP when the IMF & World Bank came here a year ago and that was enough for them to introduce new legislation ahead of the APAC meeting ...yet for the hundreds of thousands of Singaporeans struggling as a result of predatory lending nothing is done. The Malaysian govt may be accused of corruption, cronyism, and incompetence but even when they lost elections, they never resorted to curbing protests...and whatever it is, they got these 2 things done right.

Over the weekend I met up with quite a few friends and the lack of sympathy for MP Seng was quite shocking even for me. I believe nobody deserved the harm done to MP Seng-his family must be in great pain. I wish his family well. The lack of sympathy among Singaporeans reflects a shift that has taken place in our society that makes the words of our PM ring hollow among Singaporeans - "Staying together, moving ahead", "We are in this together"....never has the govt and the people drifted further apart. Some people are saying why should there be sympathy for the MP when there was none when Singaporeans who couldn't afford their bill had the electricity cut off, struggling famillies are asked to pay for neverending price hikes imposed by govt bodies and govt linked companies. The lack of sympathy goes both ways.

Today, I was greeted by this big Straits Times headline "Govt MAY tap reserves" about the govt dipping into reserves to limit the downside for the economy 1 or 2...maybe $5 billion. It talks about the govt needing to be VERY VERY careful to dip into reserves to help Singaporeans. I was wondering why we even bother to debate this when we had no debates about giving tens of billions to trouble western banks and losing a substantial part of our reserves on risky investments .....why they are so disproportionately careful when it comes to helping Singaporeans when they can just dump billions into those Western banks and Shin Corp without any check and balance. There is an urgent need for reform here and it will never come as long as the PAP maintain this elitist system ...the GIC and Temasek is a source of high paying jobs for many of these elites and our leaders will try to preserve the lack of accountability and transparency to serve their own interests.


Look at credit-card interest rates

MOST credit-card companies charge 2 per cent on rollover balance on a daily basis, if card holders do not pay the full amount on due date.
One intriguing piece of legislation I wish to draw attention to is the Moneylenders' Act.
The Act was passed to protect common people from unscrupulous moneylenders or loan sharks. The maximum interest rate a legal moneylender can charge a borrower on an unsecured loan is 18 per cent. And for only $1, the debtor can request a statement of his loan.
It is not the same with credit-card companies. Card holders have to pay a higher fee to print an old statement, if they lose their copy.
Credit-card companies also make a spread if card holders buy goods in foreign currencies. That spread is not favourable to card holders compared to the over-counter rate.
While moneylenders and credit-card companies are different service providers, they both primarily provide a credit service to the public. Of course, one difference of credit cards is that they are also convenient to use.
I applaud the recent decision by lawmakers in the United States to scrutinise credit-card companies on their interest rate charging practices.
Singapore lawmakers should also look at how credit-card companies charge their customers for card usage and the maximum interest payable. That goes for unsecured lines of credit.
Do remember to look closely at the fine-print terms and conditions on your credit cards and lines of credit. You may be in for a shock if you forget to pay on time.
Felix Ng


redbean said...

hi lucky,

this is a sad state of affair that has been ongoing for donkey years. the amazing thing is that no one seems to see anything wrong with it.

is it a case of some people/organisations are allowed to slit throats and some are not allowed?

Anonymous said...

Agree with you Lucky. As long as the reserves is to help the people, the poor, the sick, the retired - not to help GIC / Temasek invest more in Citibank, UBS, local entrepreuneurs I am happy. Long term help, not short term fixing the opposition or sweetening the ground.

May bloggers continue to keep an eye on the government.

Anonymous said...

Overcharging is a norm.

Take for example: ICA charge $60 for IC replacement; $70-$80 to renew passport.

What else?

Anonymous said...

Predatory lending is no different from loan sharks. Except one is legalised, the other is not.

Anonymous said...

Anonymous 11:12 AM said...

Overcharging is a norm.

Take for example: ICA charge $60 for IC replacement; $70-$80 to renew passport.

What else?

After 20 years of usage, the plastic IC was breaking up, so I had to replace it. The cost of $60.00 for replacement plus the photos is way too much for a piece of plastic.

redbean said...

don't forget labour cost is very high. oops, no it is senior executive cost is very high.

Eves said...

you forgot to add...women are in control of this country. LOL.

Anonymous said...

only money matters to the govt my friends. if anyone still think they have a heart, u are foolish.
the only way to get them to unplug their years is to vote some of them out.

go to the new yr party to support pinky also cost $2.

im just pleasantly suprised they removed the charge for using smrt toilets.
i hear its because some vvip needed to use the toilet & was did not have coins or something.

Merlot said...

I like your posts.

In your lingo, let's be understanding towards our caring government. Why there is little or no hesitation in throwing millions of dollars into foreign banks is because it may benefit us in the long term. These western banks may bounce back and Singapore would become a shareholder, reaping in the profits with what she has sown.

To tap into reserves for Singaporeans, what good is that for our noble government? Is there really investible interest in us common folks?

Pray tell, how could one not see why it's utterly easy to be loyal to our dear country? Sg gov - I love u.

Anonymous said...

Basically Singaporeans are screwed by the Govt. lft right and centre.

Anonymous said...

And to think that just last year they were encouraging the young to get into the borrowing binge by permiting credit cards to be issued to students...( tsk tsk )

Anonymous said...

islamic banking!islamic banking!hahaha

AlphavilleSG said...

Do you think it is the high interest rates that is stopping people using them? I don't think so.

It is the failure to clearly state the interest rates that lull bank customers into the comfort of using them, remember the Pinnacle 10 advert that you reproduced? A child cuddling a teddy bear... Mis-selling.

It is the practise in both US and UK to state the credit card interest in a clearly understandable manner, they use the APR as a guide on interest of credit.

I am all for 200% unsecure loan shark rate, as long as people understand how much they are paying. Credit should not discriminate, it should represent risk.

Anonymous said...

last week i was paying my conservancy fee, i saw a malay man who beg the town council to defer his court summon date, it seem that he has owe quite a few months due to his unstable part time job income. i was thinking, what the hell is happening, when town council has so much sinking fund to lose, we shouldn't even need to pay our conservancy fee for many months! sending poor people to court, doesn't mean he will suddenly become rich to be able to pay.

Anonymous said...

charging people a one hundred or two for sleeping in public parks too.

Anonymous said...

it's called having sex with the devil



Anonymous said...

If anyone has not seen it, watch Paul Grignon's animated Presentation of Money As Debt to have a clear picture of how governments and banks create money. Basically he tells you that each and everytime a bank makes a loan, new bank credit is created i.e. Brand New Money. He goes on to explain in a 5 part series beginning with how money was invented and the creation of banks. This is a highly informative video documentary about how corrupt today's money system is.

Anonymous said...

LuckySingaporean says:

"The Malaysian govt may be accused of corruption, cronyism, and incompetence but even when they lost elections, they never resorted to curbing protests...and whatever it is, they got these 2 things done right."

You are right about most things Lucky but saying that Malaysia never curb protests is wrong. Malaysia selectively curbs protests most of which were peaceful. Examples are the Hindraf Movement and Candlelight Vigils. They threw many peaceful protestors into detention centres using the ISA. Even opposition members were not spared, including reporters and bloggers. Below is the link to one of the many protests where force was used against Malaysian citizens.

Donaldson Tan said...

credit card interested is capped at 15% in the UK