More seeking credit counselling as incomes start to fall in
recession <!-- Author --> By Radha Basu, Senior Correspondent
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Then as her expenses sprinted past her income, the relationship
manager thought she would become a property agent to cash in on the
building boom.
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The property market stagnated suddenly. And her monthly income,
which, buoyed by commissions, could touch $10,000 at the bank,
plunged to $1,200.
By April, her credit card debts mounted to $75,000 and she was
unable to pay even the minimum sums.
'I was in despair,' said the business degree holder who
approached Credit Counselling Singapore to seek advice on how to
rein in her debts.
'I had no idea you could go from boom to bust so soon.'
It is early days yet for the recession, but job woes have
suddenly overtaken overspending as the key reason for mounting
credit card debts, show numbers from Credit Counselling Singapore
(CCS).
More than 60 per cent of CCS clients this year cited
'job-related' causes as the biggest factor that drove them deep
into debt, up from 43 per cent in 2006.
Overspending was the main culprit in 57 per cent of the cases
this year, up from 52 per cent in 2006.
A non-profit organisation, CCS helps debtors work out monthly
instalment plans to pay off credit card bills. It has counselled
more than 3,000 people since it was soft-launched in August 2003
and 15,000 have attended its weekly talks on how to pay back
ballooning debts.
As the economy heads south, the numbers of those turning up for
help at CCS are inching up. Nearly 600 attended the talks last
quarter compared to 325 during the last quarter of last year.
This month, the numbers are likely to rise further. The latest
session, last Wednesday evening, for instance, saw nearly 80
attendees.
Young and old, sharply-suited or shoddily-dressed, they listened
quietly and took notes as CCS assistant director Tan Huey Min held
forth on ways to work out payment plans with creditors.
'Open mail from your creditors, answer calls, stop using the
facilities and continue to pay whatever you can,' said Ms Tan.
Fuelled by wanton spending, credit card rollover debt in
Singapore ballooned by $296 million to $3.3 billion in the 12
months from August last year.
That is a three-fold rise from the $94 million increase recorded
in the preceding 12 months.
Ms Tan said she and her colleagues are anticipating a bigger
demand for their services as the economy worsens.
CCS' head of counselling Lim Cheng Boon said a booming economy
had caused many people to overspend in the past couple of
years.
'The sudden recession - where a client or a spouse can lose a
job or face a pay cut - is making matters worse.'
While most of the debtors are married and in their 30s and 40s,
the number of spendthrift singles in the same age groups is also on
the rise.
One of his clients, who is 44 and single, had her pay slashed
from $12,000 to $4,000 in July this year, when business slowed down
for the lifestyle firm she worked for.
Saddled with credit card debts of $288,000 - largely a result of
her love of Louis Vuitton and luxury holidays overseas, lavish
gifts for her extended family and interest - she landed up at CCS
for help.
'With the easy availability of credit cards, often people forget
that they are spending not cash but credit that will need to be
paid back soon,' said Mr Lim, who has counselled more than 500
debtors.
'And with multiple cards, many don't know how much they spend
every month.'
Any change in income can be disastrous, as marketing executive
Genevieve Lee, 33, learnt the hard way. She used her credit card
and overdraft facilities to pay $30,000 for a distance learning
course. Shortly afterwards, she lost her job.
It took her nearly two years to find another job. By then, her
debts had ballooned to $90,000. 'Since the economy was booming, I
kept thinking I'd find a job soon,' she said. 'But I never
did.'
Ms Teo is now on a debt management plan (DMP), under which she
pays a fixed sum of $1,900 to her creditors every month.
During one-on-one counselling sessions, CCS helps debtors list
out their income, expenses and surplus and work out how much they
can afford to pay back the banks. Barring a few 'exceptional
cases', like when a family member is seriously ill, the entire debt
needs to be paid back in a maximum of five years.
Telecommunications executive Lawrence Wong, 27, was at the CCS
office last week seeking help with credit-card debts of $58,000 he
chalked up in less than two years, largely as a result of Internet
betting.
'We have no money to lend - we are just a facilitator,'
counsellor Yong Siow Ying, a retired bank manager, told Mr
Wong.
After a two hour session totting up her client's monthly
expenses versus income, she worked out that he will need to fork
out about $1,020 per month to pay off his debts in five years.
Mr Wong, who is single, agreed to take on an additional weekend
job. But it is not going to be easy. Since he is a relatively new
customer, the banks may be unlikely to accept a five-year payment
plan from him, warned Ms Yong, adding 'We are in no position to
bargain.'
But her client is determined. 'I made a birthday resolution to
take charge of my debts,' he told The Straits Times. The economy,
he pointed out, was not getting any better. 'So I must start
soon.'
(The names of all the debtors in this story have been
changed at their request)
[email protected]
Serve them right for squandering their monie away. There are
just so many out there who really need monie.
