Credit Counselling Singapore provides an arbitration service between banks and borrowers that helps to provide information about debt and debt resolution.  Borrowers who have become overwhelmed by debt can learn about their options, while banks can learn about the issues that their clients face with multiple financial institutions and find solutions that help avoid personal bankruptcy.  The organisation sees financial education as a goal in helping Singaporeans understand their debt better, or to avoid excessive debt in the first place.

FinEdx: What is your background?

KHN: I had a career of 30-odd years, starting with DBS, then Overseas Union Bank (OUB). It was mainly in the consumer banking and operations area, and also international banking. I was the head of international operations at OUB, and then general manager of an international bank in Singapore for three years. I retired in 2000 and left the banking industry.

KHN: In 2000-01, some judges in the subordinate courts of Singapore felt that there were just too many legal cases coming up involving the collection of debt, and the courts’ time was increasingly taken up by debt collection cases. At that time, they felt that an organisation that did credit counselling would be very useful to bring creditors and delinquent debtors together to reach some kind of a settlement by some arrangement that would be beneficial to both parties. There were precedents in the UK and quite a few credit counselling organisations in the United States and Canada. A pro-tem committee was set up, at which time I was brought into the picture, and we started out with a 6-8 month trial run to test the water. It looked doable, so we registered CCS as a society, and here we are.

KHN: I’m a non-paid volunteer. We have full-time staff that includes a director and 15 others. There is a management committee of volunteers, and we have 6-8 volunteer counsellors that will come down and counsel debtors. This is a non-profit organisation. We are registered with the Commissioner of Charities.

KHN: CCS has two main objectives. One is preventive, teaching people to not get into trouble in the first place. What we try to do is education through lectures, workshops, seminars. Then there is the other aspect, which is debt resolution. These are for people who are already in some kind of trouble, so for that we provide information: what you can do to get out of trouble. And we also have a debt management programme, where we will put up a restructuring proposal to all of the person’s bank creditors. Under this arrangement, the bank will give them a longer period to pay, reduce the interest rate—but only for debt-distressed individuals, this is not for everybody. For people who are very clearly unable to pay, under the existing terms, like a credit card at 24% interest—they can see who is over their head. Many banks have this programme on their own, some banks call it a debt relief programme. Our debt management programme (DMP) is very special, because it involves all the bank creditors, so we write to all the creditors. It’s not a unilateral workout, everybody is involved. For this we work through The Association of Banks of Singapore. It’s an arrangement set up between ourselves and The Association of Banks of Singapore, but the banks will join in this programme. We put in a proposal; the banks, to some extent, vote on it, and if they agree for the most part, the dissenters will go along with the majority.

FinEdx: So the goal is to save a person from declaring personal bankruptcy.

KHN: Sometimes if there’s an insufficiency of income, we sometimes advise the person to find ways to raise income: a part time job, renting out rooms, getting the spouse to work. They sometimes will come back and say “okay, I’ve done the following things,” and then maybe at that point we can put it up. Of course, sometimes if all else fails, it is still up to the bank to take actions.


FinEdx: So your two missions are education and preventive measures and problem resolution. What are some of the effective programmes that you’ve had?

KHN: The problem is that when we started, we did want to give equal weight to both activities; unfortunately, most of our resources have gone into debt resolutions. The first objective has not been pursued with as much vigour as I would have hoped. The lack of resources is one thing. But over the next few months, we are going to have a partnership with another organisation that I think would be very useful in delivering this objective. I’m not in a position to tell what this organisation is, but I think that both of our organisations have the common objective of promoting financial literacy. Over the next few months there will definitely be resources that are dedicated to it, and we expect to see more effort going into this objective.


FinEdx: What are some of the effective techniques that you’ve employed.

KHN: We’ve always felt the emphasis should really be on getting them young. We actually did start some programmes in secondary schools to teach people basic credit management skills, like working up budgets, and when you borrow what are the things to look out for. Of course, for secondary schools, we use the example of signing up for handphones. It was in collaboration with the (a) polytechnics, we did it for a few schools and then it stopped. If we have the resources, we will resuscitate this. The other group of people we are very keen on are university students. This is a group that, again, it is very important to get young before they enter the workforce. The third group are also young, they are the new interns and entrants to the labour market. We were hoping to start something as part of the orientation programme that lots of organisations have for new recruits, where there would be some time given to money management. What we find with young people is that, usually when they go from a situation where they have no money to one where they are earning—for once—real money, some of them go overboard. They don’t know what kind of standard of living they can actually afford on their salaries.


FinEdx: What are some of the milestones of the development of CCS?

KHN: I’d say the first milestone would be the establishment as a society. That really was a statement that we’ve got confidence that this can work, and we set up a legal framework through which our activities could be conducted. The second milestone would be getting The Association of Banks of Singapore on board. We started off under rather adverse circumstances, where our funding was not assured, we were really living from hand to mouth. I thought that the banks at that point in time didn’t quite know where we were coming from, so there were a few years of familiarization. At the end of this period they finally understood.


FinEdx: So that’s on the bank side, what about the individuals?

KHN: Borrowers, we never had problems with borrowers. Milestones—I can’t really think of any milestones, it was slow plodding, although I would say that over the years you can see that people started to find out about us, and I think we find that more and more people came to us. So it could be because the banks referred them to us, or we became more visible. It probably happened about two years back when suddenly people began to recognise—look, if we talk about individual debt there’s actually this organisation whose purpose is to help with debt problems. We can recognise that we’re the de facto advocate or help centre for debts.


FinEdx: I didn’t realise it was such as struggle at the start. There must have been a lot of personal commitment and sense of mission.

KHN: We relied at that time a lot on volunteers. When your funding is not assured it’s tough. You dare not even commit to big office space: things are uncertain, you can’t even see beyond three months. But now I think we’ve put that behind us. Funding for us has been quite stable. We rely totally on the banks now for our funding, although I must say that everything is still done on a voluntary basis so there’s no legal compulsion for anyone to give us money. And now I have to assume then that the banks see some value in what we do; and this value is not just imaginary, it’s real, they can see that there’s some real dollar and cents return, so we’re helping them to some extent recover their debt, and if we weren’t around it may be a bit more difficult for them. Right now we’re the only party that collects this information.


FinEdx: How do you describe your personal commitment to CCS?

KHN: You have to look at the depth. A lot of people don’t understand that financial difficulties are actually the root cause of many other problems. It’s very tough on marriages, puts strain in the family, leading maybe to problems with children and all that, so a lot of social problems you can see are connected with financial matters, particularly debt distress. So it’s not just a person owing money, it sparks up a lot of undesirable social and personal difficulties. So in that case, I think that the passion we have is in trying to solve these personal difficulties, we are also helping out very directly to keep families together, that maybe in some cases we can prevent suicides. We do have suicide cases. We tell them ‘look, there are alternatives.’ The banks, to their credit, have been quite accommodating. Once you have this mechanism and the banks understand what you are trying to do, you can see it in the numbers—the bankruptcy petitions have been coming down. Why would a bank want to make a person bankrupt, knowing full well that it’s going to be totally unhelpful in this situation?


FinEdx: What do you see as main issues to be resolved in financial education?

KHN: Of course, Singapore has the MoneySense programme. Personally, I think they need to take another look at how effective this has been. I know that they have a lot of activities, but it needs a re-look, how it’s being implemented, making an assessment about how effective it has been, and introducing financial education as a subject in the schools would be very useful.


FinEdx: It’s happening in some countries already.

KHN: This is necessary, because we are living in a modern world, and the government has in fact been liberalising the rules on unsecured credit. This year they’ve reduced the income requirements, so you can see that now the move by government is to try to liberalise, have less restrictions, and the onus is therefore on the individual to take responsibility for his actions. So if that’s going to happen, you have to equip the guy with the proper tools and information where he can then make informed choices and decisions about managing his finances. And I think the Lehman mini-bonds thing is a case in point. People have a lack of awareness and understanding about financial products, bonds and things like that. This has got to start early.

For more info:
http://www.ccs.org.sg