BNM Report reveals: Unfair T&Cs being used in housing loan contracts


Some of the terms and conditions in home loan agreements which were made to favour banks were also unfair to consumers, says Bank Negara Malaysia (BNM). 


© Abdul Razak Latif | 123rf

This finding was highlighted in the 2018 Financial stability and Payments Systems report published by BNM last month. Throughout 2018, BNM  conducted a thematic review on housing loan and financing contracts to identify terms and conditions (T&Cs)that were inconsistent with reasonable expectations of fair conduct towards financial consumers.

BNM found that certain T&Cs were disproportionately skewed in, where they were in favour of the banking institutions and to the detriment of consumers.

Some of the notable issues were:

  • T&Cs that provide absolute exclusions or limitations of a banking institution’s liability and obligations
  • T&Cs that place undue reliance on signed declarations to assert that loan applicants have read and understood a contract.
  • Some T&Cs were found to be unnecessarily complex with the use of excessive legal and technical jargon, all which do not aid consumers’ understanding in any way.

Following BNM’s review, banking institutions are now required to revise any unfair TnCs and improve clarity by using plain language for both new and existing home loan and financing contracts by end of 2019.

It was also reported that the Association of Banks in Malaysia (ABM) and the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) are currently working with banking institutions to review the standardised key TnCs for home loan agreements involving a principal sum of RM500,000 and below.

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Financial providers are now required to assist credit card holders too

Given our country’s high household debt level, credit card debt is another area of concern. In the same report, the central bank shared that BNM will work on improving the conduct requirements for credit cards (to be practised by financial service providers).

These guidelines will contribute towards encouraging greater financial discipline among Malaysian consumers while assisting applicants to settle their credit card debt quicker.

Financial service providers are now required to identify vulnerable credit card holders who habitually make payments at/ near the minimum amount for an extended period. These borrowers are to be offered the choice to convert their outstanding credit card balances into term loans at lower interest rates to help them repay their debt within a reasonable period, to avoid higher financing charges or worse, face bankruptcy.

Check your home loan eligibility across 1o banks with LoanCare

New set of borrowing standards by June 2019

Consumers will be glad to know that BNM is also readying a set of standards, which will set out certain expectations for the board and management of financial service providers. The standards which will be issued in H12019 will help promote a culture where the interests of consumers are an integral part of Malaysian financial service providers’ business operations.

Edited by Reena Kaur Bhatt

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