NEWS: Citibank hike spread of their SIBOR loans (UNILATERALLY)!

BIG NEWS!  Citibank hike spread of their SIBOR loans UNILATERALLY!  You can see the details below or at this URL…

I am really curious!  I never know that BANKS can unilaterally change the “spread” of their SIBOR loans!!!!!!!!!  Isn’t doing so a violation of the agreement that the bank (e.g. Citibank here) signed with its client? 

Feeling strange about this, I went to look at my signed mortgage loan agreement and it reads:

Year 1: 3M-SIBOR + 0.85%

Year 2: 3M-SIBOR + 0.85%

Year 3 and thereafter: 3M-SIBOR + 0.85%

So, it is clear that from Year 3 and thereafter, the interest that the bank agreed to charge is "3M-SIBOR + 0.85%"!  (Note that the "0.85%" is usually referred to the "spread" or "margin"). Are most or all banks mortgage loan agreement written in this way? Then why the newspaper reported that banks have the right to change this spread?????? 

Not being sure, I asked around and somebody with the Citibank SIBOR loan said that theirs look the same, except that their spread is “0.65%”! 

If so, how can Citibank unilaterally change the spread of “0.65%” to “0.85%” (according to the news)???  There is nothing in the mortgage loan agreement that states that the bank can change the “0.65%” figure!!!!!!!!!!!  Furthermore, the banks such as Citibank are already protected as SIBOR is already floating!!!!!!!! 

My own opinion is that Citibank's stance cannot stand up to challenge legally, because there is nothing in the mortgage loan agreement that says that the bank can unilaterally change that “0.65%” spread (if the said mortgagee's situation is as I described above)!!!. I believe what Citibank is doing constitutes “unfair practices” in the Consumer Protection (Fair Trading) Act. 

I refer you to a news article on what constitute 'unfair practices' in the Consumer Protection (FairTrading) Act at this URL (or you can read below)…:

"the Consumer Protection (Fair Trading) Act states that even if the consumer had entered into a written agreement with such terms with the hotel (ignorantly or carelessly), such an agreement can be challenged in court by the consumer suing the hotel on the grounds that it is an "unfair practice".

One of the "unfair practices" specified in this Act is "taking advantage of a consumer by including in an agreement terms or conditions that are harsh, oppressive or excessively one-sided so as to be unconscionable"."

 

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Borrowers upset over hike in margin for Sibor loans

Monday, Mar 30, 2015

Rachel Boon

The Straits Times

MANY home buyers with loans pegged to the Singapore Interbank Offered Rate (Sibor) have been hit with higher repayments following the Sibor's increase this year.

That is to be expected, but some Citibank customers have also found that the margin or spread - the added percentage banks tack on to the Sibor - has also moved up.

They were informed earlier this month that the spread on their Sibor-pegged loans would increase to 0.85 per cent from the promotional rate they had signed up with. The change takes effect from April 1.

Citibank said the spreads range from 0.6 to 0.8 per cent for customers who took up loans in late 2010 and in 2011.

One customer said he has been on a three-month Sibor loan since 2011 under a two-year lock-in package. His spread has risen from 0.7 per cent to 0.85 per cent.

However, Citibank said raising the spread has affected only a small number of people.

Mr Peng Chun Hsien, Citibank Singapore's head of secured finance solutions, also stressed that the "current revision is only applicable to clients outside the lock-in period".

Another customer, a Mr Lee, said he has been on a one-month Sibor home loan since 2011.

He told The Straits Times his spread has risen from 0.65 to 0.85 per cent but he had thought the spread would stay at 0.65 per cent throughout the loan.

Mr Peng told The Straits Times: "The word 'throughout' is a term the industry uses, and refers to the tenure and period that we are covering."

He added that affected customers had been given sufficient notice so that the process is transparent and they can opt to refinance their loans. Mr Peng noted that the overall rate is still fairly competitive.

Mr Keff Hui, a broker at Mortgage Supermart Singapore, noted that an 0.85 per cent spread used to be the market rate but some banks had lowered it to attract customers.

Another client on a one-month Sibor said: "Sibor is already variable and has gone up by 100 per cent year on year. How can the spread be variable too?"

Finance industry experts say reviewing spreads is standard bank practice, but in practice, changing the spread during the loan period is uncommon.

The Straits Times understands that banks such as United Overseas Bank and OCBC Bank have not increased the spreads. A DBS Bank spokesman said DBS and POSB have not varied spreads while under an existing agreement with customers. He said an 0.85 per cent spread used to be the market rate but some banks have lowered it to attract customers.

Customer Mr Lee said: "I will have to pay $200 to $300 more a month, but the amount is not significant. It's about how the bank can do this to customers."

Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, said: "We are of the view that the banks should justify such rate changes clearly to the affected consumers. Such changes will not be fair to consumers if there is no justification to do so."

Citibank said it undertook "careful consideration of factors including prevailing market conditions" before making the move.

The Monetary Authority of Singapore (MAS) said it does not regulate the setting of interest rates but the banks must provide clear and relevant information on products and services, said a spokesman, adding that MAS has asked Citibank to review the customer feedback received.

Mr Peng said all the terms and conditions have been carefully outlined and that interest-rate definitions are clearly stated.

He encouraged affected customers to contact the bank, adding that any decision they make regarding their loans will not be bound by any penalty or fees.

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Recourse for consumers over 'unfair practices'

PUBLISHED ON MAR 18, 2015

CONSUMERS do have some legal recourse over unfair practices by businesses ("Case looks into wedding banquet cancellation fees"; Monday).

Speaker of Parliament Halimah Yacob cited the case of a couple who had to pay half the cost of the wedding banquet, despite cancelling their booking a year before the wedding. This is clearly exorbitant and punitive, which is not allowed by the law.

If the hotel wants the couple to pay half of the banquet cost, it must be able to prove in court that it has suffered such actual damages (amounting to half the cost).

Since the cancellation notice was given a year in advance, it is hard to imagine how the hotel could have suffered a loss of such an amount.

Furthermore, the Consumer Protection (Fair Trading) Act states that even if the consumer had entered into a written agreement with such terms with the hotel (ignorantly or carelessly), such an agreement can be challenged in court by the consumer suing the hotel on the grounds that it is an "unfair practice".

One of the "unfair practices" specified in this Act is "taking advantage of a consumer by including in an agreement terms or conditions that are harsh, oppressive or excessively one-sided so as to be unconscionable".

Tan Sin Liang

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Biggest problem with Medishield Life

The other day, I wrote about the problem with lack of transparency of CPF Life, first and foremost, that “CPF Life” needs to be separated as an independent entity with its annual financial statements and audits! 

The same also applies to Medishield Life! 

Medishield Life needs to be separated as an independent entity with its annual financial statements and audits as well! 

Next, there needs to be transparency of how premiums for Medishield Life are derived and calculated.  Only when “Medishield Life” is a separate entity with its financial statements will we know whether accumulated over the years, are managers of Medishield Life recommending Medishield Life premiums that is much above optimal amount and a lots of profits have been accumulated, thus that should allow Medishield Life premiums to be reduced!  Without a separate book (i.e. financial statements), Medishield Life in its current form which is not detached from CPF Board means that when there are profits accumulated, it belongs to CPF Board (and hence the Government)? And when Medishield Life premiums are adjusted higher in future (just a matter of time I suppose?), then we will know is it because of trying to accumulate more profits or really the existing Medishield premiums are too low and hence not sustainable?  Empty words are just useless!  Actions speak louder than words!  By continually refusing to separate Medishield Life into a separate entity with its financial statements and cashflows and publish them annually etc, you can't fault people from starting to speculate and believe that they are trying to make profits out of the Medishield Life scheme isn’t it? 

Transparency, transparency, transparency!  We really need transparency and separate book (i.e. financial statements) for Medishield Life individually (and separate from the book of CPF Board)!!!!!!!!!!!!!!!!!!  

The CPF problems that never get fixed!

CPF Life had been revamped with new recommendations from CPF Advisory Panel recently.  However, the myriad of problems with CPF Life still never seem to get fixed!  They are:

1)      The solvency of CPF Life has still NOT BEEN GUARANTEED by the Singapore government!  Reasons (or rather excuses?) have been given, but there is no shrieking of responsibility here when the Government had passed law to make it compulsory and enforced on its citizens in the first place!  It seems totally at odd that on one hand, they passed laws to make CPF Life compulsory, and on the other hand, they cannot stand behind and be responsible for the proper management of the system called “CPF Life” that they set up and guarantee its solvency?  By continually refusing to guarantee the solvency of CPF Life, are their actions telling us that they have totally no confidence behind the people they appoint to manage “CPF Life” and hence they don't dare to guarantee the solvency of CPF Life?

2)      Transparency of CPF Life has still not existed! 

Transparency, yes, transparency! CPF Life is about mandatory locking up of their citizens’ money by Government, and hence transparency of the book of “CPF Life” is of utmost importance!  Nobody likes their own money to be forced into management by somebody else who cannot open their books and show how their money are managed and the performance! 

To improve transparency, firstly, “CPF Life” needs to be separated as an independent entity with its annual financial statements and audits!  This is the single most important criterion!  Next, there needs to be transparency of how the CPF Life payout are being calculated, how the bequest amount are being calculated etc.  Only when “CPF Life” is a separate entity with its financial statements will we know whether accumulated over the years, are managers of CPF Life recommending CPF Life payout that is below optimal amount and a lots of profits have been accumulated, thus allowing CPF Life payout to be increased! 
Without a separate book (i.e. financial statements), CPF Life in its current form which is not detached from CPF Board means that when there are profits accumulated, it belongs to CPF Board (and hence the Government)? And when CPF Life payout is adjusted lower in future (possible), it is because of trying to accumulate more profits or really the existing payout is not sustainable?  Empty words are just useless!  Actions speak louder than words!  By continually refusing to separate CPF Life into a separate entity with its financial statements and cashflows and publish them annually etc, people obviously will start to believe that they are trying to make profits out of the CPF Life scheme isn’t it? 

Transparency, transparency, transparency!  We really need transparency and separate book (i.e. financial statements) for CPF Life individually (and separate from the book of CPF Board)!!!!!!!!!!!!!!!!!!