THE Autoriti Monetari Brunei Darussalam (AMBD) has eased the norms for availing credit cards and personal loans.
As per the latest amendments to AMBD’s regulations, banks may now offer credit cards without the precondition for borro-wers to assign their salary or placing a fixed deposit under lien (legal right of a creditor to sell the collateral property of a debtor who fails to meet the obligations of a loan contract) to the credit card issuing bank.
The amendments also allow for borrowers to top-up or restructure their unsecured credit or financing facility after 50 per cent of the original tenor has lapsed subject to certain conditions on borrower’s repayment history.
From now on, rental income and business income for sole proprietors are allowed to be included as part of the borrower’s gross monthly income subject to certain conditions.
Also, credit cards fully secured by fixed deposits will not be included in the computation of borrower’s Total Debt Service Ratio (TDSR).
The new key amendments are part of AMBD’s ongoing commitment to provide a stable and healthy consumer finance market and effective from October 28, the regulator said in a statement.
The changes apply to all banks, finance companies and Perbadanan Tabung Amanah Islam Brunei (TAIB).
On May 28, 2015, AMBD had issued several regulatory notices which aimed to reduce household debt as a source of vulnerabilities to the economy as a whole.
The key features of these notices, which were effective from June 8, 2015, included the introduction of a maximum TDSR to all customers applying for a credit/ financing facility, which will ensure that there is sufficient disposable income for the borrower’s daily living expenses and hence act as a tool to encourage borrowers to manage their debt efficiently.
The maximum TDSR set by AMBD is at 60 per cent for borrowers with a minimum net salary of B$1,750. Below this salary range, borrowers will be subject to the individual financial institutions’ internal policy on TDSR.
Banks and Perbadanan TAIB are also encou-raged to offer a consolidation loan/financing Scheme, which aims to assist heavily indebted borrowers with significant debt monthly obligations.
Subject to meeting the required set of criteria, this scheme allow borrowers to consolidate their existing debt obligations and thus to have a lower monthly repayment obligation overall.
Banks and Perbadanan TAIB offering unse-cured personal credit/financing facilities are allowed to offer higher limits at 18 times of the borrower’s monthly net salary at a maximum tenure of six years. Borrowers are required to purchase an insurance/Takaful protection policy for every new and restructured (top-up) facility, which provides protection to the borrower in the event of death and/or total permanent disability.
Certain fees such as early settlement fees and restructuring/top-up fees are capped to allow customers to settle early without unnecessary financial burden. Fees related to issuances of certificate of balance and clearance letter are also capped to allow customers to move to their preferred banks, without incurring high fees.
The regulatory notice also required the relevant financial institutions to be more transparent and provide maximum disclosure on all fees and charges imposed on products and services to their customers. Measures also include providing a loan/financing repayment schedule upon approval of a new credit/financing facility.
These measures are aimed at encouraging better management of personal debt and increasing the level of financial literacy among the public.
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