Friday October 7, 2011

Govt outlines measures to reduce household debt

THE Government had outlined and undertaken several initiatives to promote sound household debt management, in a bid to ensure household indebtedness remains at a prudent level.

The authorities implemented the Pengurusan Wang Ringgit Anda (POWER!) programme in Febraury 2011 to promote financial literacy and prudent financial management, especially among young adults and first-time borrowers.

The programme provides participants with financial knowledge and skills to make better financial-related decisions. As at end-July 2011, a total of 10,592 individuals have participated in the programme.

The eligibility requirements for credit cards were also revised effective March 18, 2011, aimed to instil sound financial and debt management among users, as well as to promote fair and responsible business practices by the card issuers.

The minimum annual income eligibility for new credit cards was raised to RM24,000 from RM18,000 previously, while cardholders earnings RM36,000 per annum and less can only hold cards from a maximum of two issuers.

Existing cardholders who hold credit cards from more than two issuers have until the end of 2011 to select their preferred issuers and will be given at least two years to service their outstanding debts with the cards that have been cancelled.

The maximum credit limit is also capped at double the monthly income of the cardholder for each issuer.

Issuers or banks are now not allowed to increase the cardholders’ credit limit without their consent and they are also not allowed to offer credit advance in the form of cheque payable to cardholders unless requested.

Effective December 2011, cardholders should also be provided with customised information on the duration to fully settle their outstanding balance and the total interest costs if only minimum repayments are made.

The issuers must also provide Product Disclosure Sheet containing key information on the credit card’s features, fees and obligations of cardholders to facilitate comparison and informed decision-making.

Implications and alerts of meeting only minimum and partial repayments must also be displayed prominently.

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