Tuesday, January 1, 2013

Protection from rogue banks


http://www.mmail.com.my/story/protection-rogue-banks-42170

Protection from rogue banks
New steps by Bank Negara to mitigate risk of housebuyers falling prey to greedy, unscrupulous foreign financial institutions
MONDAY, DECEMBER 31, 2012 - 15:03
by Terence Fernandez
Location:
KUALA LUMPUR

INCIDENCES of rogue foreign banks victimising local housebuyers are what prompted the government to introduce new sets of rules that keep them in check and protect consumers, one of them being the standardisation of housing loan and home financing agreements, announced by Bank Negara Malaysia (BNM) on Friday.

National Housebuyers’ Association (HBA) secretary-general Chang Kim Loong told The Malay Mail the association had mooted the standardisation of forms for housing loans to enable the authorities to reign in foreign banks.

“We helped draft the new proposal with Pemudah, the agency in the Prime Minister’s Department which improves the delivery system,” Chang said.

He said there were several discrepancies in requirements and clauses between foreign and local banks.

“There were hidden clauses like the imposition of a minimum RM50 for late payment, unilaterally imposed clauses that were unfair to the customers,” he said.

He added that hidden clauses capitalised on the misfortune of customers who had hit hard times, delinquent accounts (defaulters) being victimised to enrich the banks.

“Each time an in-house lawyer’s letter is sent, the cost would be charged to the customer. They would do so promptly and frequently, putting additonal financial burden on the people,” Chang said.

He said with the standardisation, no more additional terms could be put in.

“This should have been done a long time ago. We already have a standard Sales and Purchase Agreement for developers ... why can’t we have same for bank loans?

“All that needed to be done was attach a schedule to the loan agreement with the customer’s name, address, MyKad number, tenure of loan and and repayment terms,” he added.

BNM announced that the new terms were limited to properties valued at up to RM500,000, but Chang said it should be extended to residential properties that cost more.

“At the end of the day, the cost of housing is rising and we need to be fair to all, but we must commend BNM for taking heed of the people’s plight and taking action,” he said.

BNM had said that the principal sum referred to can be extended to cover renovation costs, mortgage reducing term assurances or such other insurance premiums permitted by the banking institution, as well as legal fees incurred in the purchase.

The Association of Banks in Malaysia (ABM) said the standardised template would further promote consumers’ understanding of their rights and obligations, enabling them to make informed decisions that best meet their financial circumstances.

It said banking institutions should endeavour to improve the turnaround time for the processing of housing loans.

The Federation of Malaysian Consumers’ Association (Fomca) said the standardisation of documents creates a protection mechanism for unsuspecting borrowers.

Its secretary-general, Datuk Paul Selvaraj, said the use of language that was easily understood in the document — rather than legal jargon — could improve understanding by the borrowers.

“Consumers seldom read the agreement because of the complex language and the thickness of the agreement which is like a dictionary. Even when read, we seldom understand the contents,” he said.

“And when there are terms that we understand, it is difficult to ask the bank to amend them.

“When they are standardised, it will give basic protection to the consumers and an assurance that our interests are protected.”