SAGE Talk: Inception of Credit Counselling Singapore (Part 1)

Reminiscences of CCS first Chairman. This is the first of a series of articles by Mr Kuo How Nam (founding member and former Chairman of Credit Counselling Singapore). How Nam’s articles are scheduled to be published on first Fridays of the month.

It has been 20 years since the idea of Credit Counselling Singapore (CCS) was first mooted.

Looking back, CCS was an idea first mooted from the State Courts and became a charity that to date employs almost 60 full-time staff and has helped thousands of debt-distressed borrowers dealt with their debts through credit counselling and loan restructuring programmes.

In the early 2000s, the State Courts saw a big increase in legal suits initiated by the banks to recover debts.

A group of volunteers got together to start a pilot run, and this was followed by the formal launch of the project. Some help came from Singapore Pools, SouthWest CDC and The Association of Banks in Singapore (ABS). The most daunting task was to get the cooperation of the banks in supporting the scheme. Naturally there were some suspicions whether this would be a charity started by do-gooders and would have an anti-bank, anti-credit agenda.

The project did not have the formal endorsement of ABS initially. CCS had to deal with the banks on an individual basis and not as an organized group. The banks were basically free to act on their own.

In the absence of a formal agreement, first cases were put up by CCS on a best-efforts basis. Usually there would be between 5-7 banks and CCS would provide relevant information on the debtor, in particular the financial circumstances, work out a budget to determine the amount available to make repayment, and the pro-rata share of this amount to the various creditors, with the tenure and interest rate which CCS deemed reasonable. It would be up to the individual banks to agree to the suggested arrangement. We did however emphasize to the debtors that regardless of what the banks said, they were required to start paying the proposed amounts immediately to their creditors.

The response of the banks was mixed. Some wanted different amounts. Some chose not to respond. There were some creditors who just went ahead with legal action. But the positive effect of our efforts was that many debtors started paying something towards their debts and the banks could see an effort from the debtors to pay. Collection calls to the debtors began to reduce and debtors were less pressurized.

The situation was not satisfactory as we could not assure the debtors that their creditors had agreed officially to the proposed repayment plan. But at least we got the ball rolling. The creditors received information on the debtors and realised that there were other creditors involved. The problem with the bank’s own individual debt relief programme was that they did not consider the individual’s total indebtedness and ability to pay, and therefore the chances of non-payment were high.

We were then dealing with the banks on an informal basis, ie. with no formal agreement or understanding for the first couple of years. We put up proposals to each individual bank who was free to react without regard to what other creditors were doing. Sometimes it was hard to explain to the debtors why one creditor was taking legal action when the other creditors were at least acquiescent.

The turning point will be explained in the next article…

This article was contributed by Kuo How Nam.

Published 1 July 2022.