I WOULD like to refer to the article ‘Call to review TDSR limit’, published in the Borneo Bulletin on May 5, 2017.
While the Total Debt Service Ratio (TDSR) was introduced to curb limits on financial obligations and encourage individuals to manage debts efficiently, I would like to highlight five issues here.
I totally agree with the intention of TDSR, but it does have its flaws. It applies to individuals with net disposable income of above $1,750.
My first question is why $1,750? Why not $2,000 or $500, etc.
I would like to ask whomsoever proposed this $1,750 that is there any empirical data (when was this study done, by whom, what was the sampling size, what was the composition of the sample size, was it conducted by credible parties, etc) which suggested individuals with disposable income of above $1,750 are likely to be overburdened with debt or do not manage their debts efficiently?
Secondly, what about individuals with net disposable income of less than $1,750? Why is there no TDSR requirement for them? Wouldn’t this cause confusion to the public?
Thirdly, if an individual earns, say $20,000 every month and his monthly commitments total $14,000, this would mean his TDSR would be 70 per cent and he will be left with an income of $6,000 which is quite substantial.
Under no circumstances would the individual be granted a loan. If he wants to take a personal loan or buy a car with a repayment of just $300 which is only five per cent of his available income, he cannot get a loan.
This individual has $6,000 income left, but he is unable to avail a loan. Does this make any sense?
I would now like to talk about credit cards. I have three credit cards jointly with my husband. If I take a loan, the bank will immediately deduct eight per cent from the combined limit of cards to follow the TDSR rule. I find this silly.
My husband and I seldom use all three credit cards at any given time and the only reason why we keep three different cards is because when we are overseas, some shops only accept certain cards.
Is it fair to deduct eight per cent for all three credit cards when we seldom use all three at any given time?
And lastly, I would like to draw your attention to a paragraph in the article which states “… many consumers who exceeded the TDSR limit were lured into taking up rental cars…”
Why would this not be subjected to TDSR? Is it because it is “rental”?
So if I live in a “rented” house then why is it that my house’s rental payments are subjected to TDSR?
I have no association with the car business.
But I find it depressing to learn from the article that with TDSR, the risk of increasing unemployment (for example, salesmen being retrenched) will be high because they can’t achieve their targets.
I say this because my youngest brother is a salesman. He has a Masters in Banking and Financial Services.
He was unemployed for four years. There was no job for him in the government service. He got a job as a salesman which earns him a decent income.
Now with TDSR, he barely makes ends meet.
Sometimes we need to take two, three, four or five steps and ask how does TDSR affect other upstream or even downstream industries/sectors?
Did the persons who suggested TDSR comprehend its ripple effects ie impact to local business and employment?
I remain hopeful that someone could shed light on this TDSR issue before more jobs are lost.