HUSNIYAH BT. ABD. RAHIM BILIK A2-14 Jabatan Pengurusan Sumber & Pengajian Pengguna

FEM 3204 : 3 (2+1)FEM 3204 : 3 (2+1)Perancangan Kewangan Dalam Perancangan Kewangan Dalam

Pasaran GlobalPasaran GlobalFinancial Planning in a Global Financial Planning in a Global

MarketMarketHUSNIYAH BT. ABD. RAHIMHUSNIYAH BT. ABD. RAHIM

BILIK A2-14BILIK A2-14Jabatan Pengurusan Sumber & Pengajian Jabatan Pengurusan Sumber & Pengajian

PenggunaPenggunaFakulti Ekologi ManusiaFakulti Ekologi Manusia

Chapter 7Chapter 7

Financial Regulation Financial Regulation and Laws, and the and Laws, and the

Effect on Individual Effect on Individual and Organisationand Organisation

Financial Laws in MalaysiaFinancial Laws in Malaysia

Laws that govern consumer credit in Laws that govern consumer credit in Malaysia with different authorities Malaysia with different authorities administering these lawsadministering these laws

These laws are:These laws are: Hire-Purchase Act, 1967;Hire-Purchase Act, 1967; Moneylenders Act, 1951;Moneylenders Act, 1951; Pawnbrokers Act, 1972;Pawnbrokers Act, 1972; Banking And Financial Institutions Banking And Financial Institutions

Act, 1989; andAct, 1989; and Islamic Banking Act, 1983Islamic Banking Act, 1983

AdministrationAdministration

The Hire-Purchase Act, 1967; Ammendment The Hire-Purchase Act, 1967; Ammendment 20042004

under the jurisdiction of the Ministry of under the jurisdiction of the Ministry of Domestic Trade and Consumer Affairs Domestic Trade and Consumer Affairs

regulates the business of hire purchase regulates the business of hire purchase financing which is normally carried out by financing which is normally carried out by Credit Companies licensed under the Credit Companies licensed under the Moneylenders Act, 1951 (or being granted Moneylenders Act, 1951 (or being granted exemption) and Finance Companies licensed exemption) and Finance Companies licensed under the Banking and Financial Institutions under the Banking and Financial Institutions Act, 1989 (BAFIA)Act, 1989 (BAFIA)


Moneylenders Act 1951 and Pawnbrokers Act Moneylenders Act 1951 and Pawnbrokers Act 19721972

administered by the Ministry of Housing administered by the Ministry of Housing and Local Government and Local Government

the license is issued by the state the license is issued by the state government and Kuala Lumpur City Hallgovernment and Kuala Lumpur City Hall

Moneylenders Act 1951 is to regulate Moneylenders Act 1951 is to regulate money lending activitiesmoney lending activities

Pawnbrokers Act 1972 regulates the Pawnbrokers Act 1972 regulates the business of pawnbroking carried out by business of pawnbroking carried out by pawn shopspawn shops


The BAFIA 1989 and Islamic Banking Act 1983 The BAFIA 1989 and Islamic Banking Act 1983 under the purview of the Ministry of Finance under the purview of the Ministry of Finance

and administered by the Central Bank of and administered by the Central Bank of Malaysia (Bank Negara Malaysia)Malaysia (Bank Negara Malaysia)

The BAFIA 1989 regulates the business of The BAFIA 1989 regulates the business of commercial banks and finance companies commercial banks and finance companies

The Islamic Banking Act 1983 regulates the The Islamic Banking Act 1983 regulates the business activities of Bank Islam Malaysiabusiness activities of Bank Islam Malaysia

Hire-Purchase Act 1967Hire-Purchase Act 1967RepossessionRepossession

1.1. Owner (seller) has the right to repossess the item Owner (seller) has the right to repossess the item whenever:whenever:

a)a) Hirer fail to pay two successive full installment or fail Hirer fail to pay two successive full installment or fail to pay the last installment. If a hirer is deceased, the to pay the last installment. If a hirer is deceased, the repossession could take place after there have been repossession could take place after there have been four successive of default paymentsfour successive of default payments

b)b) The owner has issued written notice to the hirer The owner has issued written notice to the hirer indicating the intention to repossess using Schedule 4. indicating the intention to repossess using Schedule 4.

c)c) Owner has issued another notice to the hirer 14 days Owner has issued another notice to the hirer 14 days after the first notice after the first notice

d)d) The period of 21 days after the notice of Schedule 4 The period of 21 days after the notice of Schedule 4 expiredexpired

Hire-Purchase Act 1967Hire-Purchase Act 1967

RepossessionRepossession

2.2. Hirer who returns goods not liable to pay cost of Hirer who returns goods not liable to pay cost of repossession, cost of incidental to taking possession, and repossession, cost of incidental to taking possession, and the cost of storagethe cost of storage

3.3. Owner must give notice of Schedule 5 to hirer in 21 days Owner must give notice of Schedule 5 to hirer in 21 days after repossession take place to give enable the hirer to after repossession take place to give enable the hirer to fulfilled his or her agreementfulfilled his or her agreement

4.4. Owner is compulsory to confess regarding the repossession Owner is compulsory to confess regarding the repossession of the item by giving the hirer a document stating that the of the item by giving the hirer a document stating that the item has been received, specification of the item, date, time item has been received, specification of the item, date, time and the address from where it is repossessedand the address from where it is repossessed

Hire-Purchase Act 1967Hire-Purchase Act 1967

RepossessionRepossession

5.5. Owner has the right to sell the item repossessed after the period Owner has the right to sell the item repossessed after the period of 21 days (Schedule 5) expiredof 21 days (Schedule 5) expired

6.6. Hirer has the right before the due date of submission of Schedule Hirer has the right before the due date of submission of Schedule 5 to ask the owner to return back the item;5 to ask the owner to return back the item;

a)a) after paying the amount payable plus the interest payable after paying the amount payable plus the interest payable and all expenses regarding the repossession (expenses to and all expenses regarding the repossession (expenses to repossess, storage, maintenance & repair), orrepossess, storage, maintenance & repair), or

b)b) after fulfilling the agreement by paying the balance of the after fulfilling the agreement by paying the balance of the loan and all expenses regarding the repossessionloan and all expenses regarding the repossession

5.5. Hirer has the right to introduce potential buyer that is willing to Hirer has the right to introduce potential buyer that is willing to pay for the item according to the valuation of the owner.pay for the item according to the valuation of the owner.

Moneylenders Act, 1951 Moneylenders Act, 1951

Credit companies that are licensed under this act Credit companies that are licensed under this act give out business or personal/consumer loans as give out business or personal/consumer loans as well as carry on hire purchase financingwell as carry on hire purchase financing

While carrying out hire purchase financing it is While carrying out hire purchase financing it is subjected to the provisions of the Hire-Purchase Act subjected to the provisions of the Hire-Purchase Act just like the Finance Companiesjust like the Finance Companies

It can only operate from the premise the address of It can only operate from the premise the address of which is stated in the license which is stated in the license

Moneylenders Act, 1951 (cont.) Moneylenders Act, 1951 (cont.)

limits the maximum interest rate that can be limits the maximum interest rate that can be charged i.e. 12% per annum for secured loans and charged i.e. 12% per annum for secured loans and 18% per annum for unsecured loans18% per annum for unsecured loans

The companies granted exemption from the Act can The companies granted exemption from the Act can operate from anywhere they like and charge any operate from anywhere they like and charge any rate of interest they wishrate of interest they wish

As there is no provision in the Act to govern the As there is no provision in the Act to govern the terms and conditions of loans given, the companies terms and conditions of loans given, the companies can and do impose terms and conditions in their can and do impose terms and conditions in their favor and at the expense of the consumersfavor and at the expense of the consumers

Pawnbrokers Act 1972 Pawnbrokers Act 1972

Pawn shops are licensed under this act carry out Pawn shops are licensed under this act carry out pawnbroking which is a quick and convenient source pawnbroking which is a quick and convenient source of creditof credit

The interest rate allowed to be charged under the law is The interest rate allowed to be charged under the law is 22% per month or 24% per annum which is rather high % per month or 24% per annum which is rather high considering the fact that loans given out are more than considering the fact that loans given out are more than covered by the value of the collateralcovered by the value of the collateral

Gold objects such as gold chains and gold bangles Gold objects such as gold chains and gold bangles when pawned are not weighed or measured and hence when pawned are not weighed or measured and hence the weight or length of item is not recorded in the the weight or length of item is not recorded in the pawn ticket or receiptpawn ticket or receipt

Pawnbrokers Act 1972 (cont.)Pawnbrokers Act 1972 (cont.)

In the case of objects pawned are lost due to theft, robbery or fire, the pawn shop owner is only liable to pay compensation of the pawned sum plus another 25% of the pawned sum

Provides for pawnshop owners to forfeit objects Provides for pawnshop owners to forfeit objects pawned and not redeemed within the stipulated pawned and not redeemed within the stipulated period of time if the pawned value is less than period of time if the pawned value is less than RM100.00RM100.00

For objects where the pawned value exceeds For objects where the pawned value exceeds RM100.00 and which are not redeemed, then the RM100.00 and which are not redeemed, then the pawnshop owner had to follow a certain pawnshop owner had to follow a certain procedure before the objects are auctioned off by procedure before the objects are auctioned off by a licensed auctionera licensed auctioner

Pawnbrokers Act 1972 (cont.) Pawnbrokers Act 1972 (cont.)

Pawnshop owners have to send a registered notice to Pawnshop owners have to send a registered notice to the customer informing the action taken to auction the the customer informing the action taken to auction the item. The notice should be accepted by the customer item. The notice should be accepted by the customer 7 days before the auction take place.7 days before the auction take place.

The pawnshop owners are responsible on any lost or The pawnshop owners are responsible on any lost or damage due to theft or fire damage due to theft or fire

Related to the Pawnbrokers Act 1972 Related to the Pawnbrokers Act 1972 (cont.) (cont.)

Customers are advised to write down their current Customers are advised to write down their current address to the pawnshop and informing them of any address to the pawnshop and informing them of any change in addresschange in address

Always keep a receipt each time you made Always keep a receipt each time you made repayments. If the receipt is lost, you are entitled to repayments. If the receipt is lost, you are entitled to have a copy of it free of chargehave a copy of it free of charge

BAFIA 1989BAFIA 1989

regulates banks and finance companies and provides regulates banks and finance companies and provides protection for depositors but not consumers i.e. protection for depositors but not consumers i.e. borrowers of loansborrowers of loans

Interest rate on loans is regulated through guidelines Interest rate on loans is regulated through guidelines issued by the Central Bank and at present is pegged at issued by the Central Bank and at present is pegged at Base Lending Rate (BLR) plus a spread of 2.5%Base Lending Rate (BLR) plus a spread of 2.5%

Interest rate for credit card loans are not regulated at all Interest rate for credit card loans are not regulated at all and vary from 1.75% to 2% per monthand vary from 1.75% to 2% per month

For credit card loans, the Central Bank guidelines only For credit card loans, the Central Bank guidelines only stipulate that the minimum monthly repayment is to be stipulate that the minimum monthly repayment is to be at 5% of total credit usageat 5% of total credit usage

BAFIA 1989 (cont.)BAFIA 1989 (cont.)

All other terms and conditions are stipulated and All other terms and conditions are stipulated and imposed by the banks and finance companies via imposed by the banks and finance companies via the loan agreement signedthe loan agreement signed

In hire purchase financing, finance companies In hire purchase financing, finance companies charge interest rates in accordance with the charge interest rates in accordance with the provisions of the Hire-Purchase Act 1967 which provisions of the Hire-Purchase Act 1967 which caps interest rate at a maximum of 10% per annum caps interest rate at a maximum of 10% per annum on a fixed term basison a fixed term basis

various interest rates imposed are based on different various interest rates imposed are based on different methods of calculationmethods of calculation

Credit saleCredit sale

Is not under the Hire-Purchase Act because it is not Is not under the Hire-Purchase Act because it is not financed by a third partyfinanced by a third party

There is no ‘hirer’ There is no ‘hirer’ No need to pay a downpayment of 10% on the price No need to pay a downpayment of 10% on the price

chargedcharged The credit is provided by the vendor The credit is provided by the vendor It also is not under the Moneylenders Act because no It also is not under the Moneylenders Act because no

actual money changes hand from the lender to the actual money changes hand from the lender to the borrower borrower

Credit Card GuidelinesCredit Card Guidelines

The operation of credit cards are governed by the provisions The operation of credit cards are governed by the provisions contained in the Payment System Act 2003 (Act 627 PSA) and contained in the Payment System Act 2003 (Act 627 PSA) and the general law of contract the general law of contract

Governing body is the Central Bank of Malaysia (Bank Negara Governing body is the Central Bank of Malaysia (Bank Negara Malaysia)Malaysia)

Pursuant to Sections 25 & 70 of the PSA, guidelines were Pursuant to Sections 25 & 70 of the PSA, guidelines were issued by Bank Negara Malaysia on 19issued by Bank Negara Malaysia on 19thth October 2003 October 2003

Later updated to a Credit Card Guidelines (Version 2.0), came Later updated to a Credit Card Guidelines (Version 2.0), came into force on 1into force on 1stst July 2004 July 2004

Credit Card Guidelines Credit Card Guidelines (cont.)(cont.)

It sets the minimum requirement s on credit card It sets the minimum requirement s on credit card operations that shall be adhered to by all issuers of operations that shall be adhered to by all issuers of credit cards in Malaysiacredit cards in Malaysia

It has the force of law, as any person who fails to It has the force of law, as any person who fails to comply with the same may be guilty of an offence comply with the same may be guilty of an offence punishable under Section 57 of PSApunishable under Section 57 of PSA

Credit Card Guidelines Credit Card Guidelines (cont.)(cont.)

Guidelines on charges related to credit cardGuidelines on charges related to credit card The late payment charges should not be more than The late payment charges should not be more than

1% of the amount in default or Ringgit Malaysia Ten 1% of the amount in default or Ringgit Malaysia Ten (RM10.00) whichever is higher, and(RM10.00) whichever is higher, and

A finance charge may be imposed up to a maximum A finance charge may be imposed up to a maximum of 1.5% per month which is equivalent to 18% per of 1.5% per month which is equivalent to 18% per annum on the total outstanding balanceannum on the total outstanding balance

International International Regulation/LawsRegulation/Laws

Laws in USA for credit/financial transactionsLaws in USA for credit/financial transactions Truth –in-Lending ActTruth –in-Lending Act Credit Card Insurance ActCredit Card Insurance Act Fair Credit Reporting ActFair Credit Reporting Act Fair Credit Billing ActFair Credit Billing Act Equal Credit Opportunity ActEqual Credit Opportunity Act Fair Debt Collection Practices ActFair Debt Collection Practices Act Electronic Fund Transfer ActElectronic Fund Transfer Act

International International Regulation/LawsRegulation/Laws

Depository Institutions Deregulation and Monetary Depository Institutions Deregulation and Monetary Control ActControl Act

Competitive Equality Banking ActCompetitive Equality Banking Act Fair Credit and Charge Card Disclosure ActFair Credit and Charge Card Disclosure Act Home Equity Loan Consumer Protection ActHome Equity Loan Consumer Protection Act Financial Institutions Reform, Recovery and Financial Institutions Reform, Recovery and

Enforcement ActEnforcement Act Home Mortgage Disclosure ActHome Mortgage Disclosure Act Community Reinvestment ActCommunity Reinvestment Act

Issues and Problems Issues and Problems Related to Financial LawsRelated to Financial Laws

Several legislations (ministries) governed the lawsSeveral legislations (ministries) governed the laws A consumer would face difficulty in solving their A consumer would face difficulty in solving their

problems related to financial matters or any transactions in problems related to financial matters or any transactions in the financial industry.the financial industry.

Several issues and problems faced by consumers are Several issues and problems faced by consumers are discussed discussed

1. The requirements would vary from one 1. The requirements would vary from one legislation to anotherlegislation to another. Eg. the moneylender . Eg. the moneylender & pawnbroker need license to operate but the & pawnbroker need license to operate but the licensing requirements are not provided for licensing requirements are not provided for the regulation of hire purchase activities. the regulation of hire purchase activities.


2.2. The maximum rates for interest The maximum rates for interest charge are different.charge are different. For hire-purchase transaction, the For hire-purchase transaction, the

maximum rate for the fixed charge is 10% maximum rate for the fixed charge is 10% and 17% for the variable charge, and 17% for the variable charge,

pawnbroking transaction is 2% a month pawnbroking transaction is 2% a month which is equivalent to 24 % per annum which is equivalent to 24 % per annum

moneylending is at 12% per annum for moneylending is at 12% per annum for secured loans & 18% per annum for secured loans & 18% per annum for unsecured loans. unsecured loans.


3.3. There are also problems in the There are also problems in the application of those statutes since they are application of those statutes since they are under the purview of different ministries. under the purview of different ministries. The Moneylenders Act 1951 and the The Moneylenders Act 1951 and the

Pawnbrokers Act 1952 are under the Pawnbrokers Act 1952 are under the purview of the Ministry of Housing and local purview of the Ministry of Housing and local Government. Government.

The Banking and Financial Institutions Act The Banking and Financial Institutions Act 1989 is administered by the Central Bank of 1989 is administered by the Central Bank of Malaysia (Bank Negara) and is under the Malaysia (Bank Negara) and is under the jurisdiction of the Ministry of Finance.jurisdiction of the Ministry of Finance.


The Hire Purchase Act 1967, is under the The Hire Purchase Act 1967, is under the jurisdiction of the Ministry of Domestic Trade, Co-jurisdiction of the Ministry of Domestic Trade, Co-operatives & Consumerism. operatives & Consumerism.

Many co-operatives including Bank Rakyat is Many co-operatives including Bank Rakyat is administered by the Co-operatives Societies Act 1993 administered by the Co-operatives Societies Act 1993 & at present are under the purview of the Ministry of & at present are under the purview of the Ministry of Domestic Trade, Co-operatives and Consumerism. Domestic Trade, Co-operatives and Consumerism.

Administration and supervision would be different. It Administration and supervision would be different. It does not only create problems to administrative does not only create problems to administrative bodies but create confusions among consumers. bodies but create confusions among consumers.


4.4. Some consumer credit transactions are not Some consumer credit transactions are not governed by any statute, credit sales & credit governed by any statute, credit sales & credit card. card.

Credit sales are offered by retail outlets selling Credit sales are offered by retail outlets selling consumer durable goods eg furniture, consumer durable goods eg furniture, electrical/electronic products. electrical/electronic products.

Payment are made by installments & total payment Payment are made by installments & total payment can be more than double the cash price. can be more than double the cash price.

Credit sales are not governed by Hire Purchase Act Credit sales are not governed by Hire Purchase Act 1967 as it is not financed by a third party. 1967 as it is not financed by a third party.

It does not falls under Moneylender Act 1967 as the It does not falls under Moneylender Act 1967 as the credit is given by the seller & not by the moneylender. credit is given by the seller & not by the moneylender. There is There is no moneyno money changed hand between the parties. changed hand between the parties.


The credit sale consumers can only rely on the law of The credit sale consumers can only rely on the law of contract, the Sales of Goods Act 1957 & the contract, the Sales of Goods Act 1957 & the Consumer Protection Act 1999 which are not the Consumer Protection Act 1999 which are not the statutes dealing specifically with credit transactions. statutes dealing specifically with credit transactions.

For credit card, there is no statutory protection For credit card, there is no statutory protection available to consumers.available to consumers.

The Credit Card Guidelines issued by the Central The Credit Card Guidelines issued by the Central Bank only provide that the maximum interest charge Bank only provide that the maximum interest charge is 18 %. is 18 %.

All other terms in the agreement are left to be All other terms in the agreement are left to be determined by the financial institutions without determined by the financial institutions without statutory intervention. statutory intervention.


Eg. Loan provided by co-operative societyEg. Loan provided by co-operative society Another type of consumer credit is the loan provided Another type of consumer credit is the loan provided

by any co-operative society registered under the Co-by any co-operative society registered under the Co-operative Societies Act 1948 to its members.operative Societies Act 1948 to its members.

It does not fall under the Moneylender Act 1951 since It does not fall under the Moneylender Act 1951 since it is clearly excluded by section 2A in the act. it is clearly excluded by section 2A in the act.

The provisions regarding loan under the Co-operative The provisions regarding loan under the Co-operative Societies Act 1948 are generally provided however it Societies Act 1948 are generally provided however it fails to address many issues. fails to address many issues.

Section 51 of the statute clearly states that credit Section 51 of the statute clearly states that credit facility is subjected to the by-laws of such co-operative facility is subjected to the by-laws of such co-operative society. society.


Looking at that, the terms of the loan Looking at that, the terms of the loan seems to be determined by the co-seems to be determined by the co-operatives. operatives.

Recently, the Ministry of Domestic Trade, Recently, the Ministry of Domestic Trade, Co-operatives and Consumerism is in Co-operatives and Consumerism is in charge of handling the activities of co-charge of handling the activities of co-operative societies however it is too early operative societies however it is too early to see its effectiveness in governing these to see its effectiveness in governing these transactionstransactions


5.5.The standard form contract that already The standard form contract that already becomes a standard practice in the industry becomes a standard practice in the industry creates problem.creates problem.

No time or opportunity to read or get professional No time or opportunity to read or get professional advice before signing the contract. advice before signing the contract.

They might not understand its terms. If they do , They might not understand its terms. If they do , financial providers may not be willing to change the financial providers may not be willing to change the clauses, making no choice for consumers either to clauses, making no choice for consumers either to take it or leave it.take it or leave it.

In Malaysia, there is no statutory provision that In Malaysia, there is no statutory provision that deals specifically with exemption clauses and deals specifically with exemption clauses and standard form contract. standard form contract.


6. The availability of good redress mechanism is 6. The availability of good redress mechanism is an important aspect in consumer protection. an important aspect in consumer protection.

For banking transactions, the Financial For banking transactions, the Financial Mediation Bureau (FMB) is an independent Mediation Bureau (FMB) is an independent body that provides avenue as alternative to body that provides avenue as alternative to courts that settle disputes between financial courts that settle disputes between financial providers and the consumers. providers and the consumers.

However, not all financial providers are However, not all financial providers are members of FMB & thus consumers are not members of FMB & thus consumers are not protected in all situations. protected in all situations.


Under the Consumer Protection Act 1999, Under the Consumer Protection Act 1999, the Tribunal for Consumer Claims (TCC) the Tribunal for Consumer Claims (TCC) has been established as an alternative has been established as an alternative redress mechanism to consumers in a redress mechanism to consumers in a cheap, quick & informal manner. cheap, quick & informal manner.

However, only complaints which are However, only complaints which are under the jurisdiction of the Ministry of under the jurisdiction of the Ministry of Domestic Trades, Co-operatives & Domestic Trades, Co-operatives & Consumerism can be brought to the TCC.Consumerism can be brought to the TCC.

HUSNIYAH BT. ABD. RAHIM BILIK A2-14 Jabatan Pengurusan Sumber & Pengajian Pengguna

Documents

Transcript of HUSNIYAH BT. ABD. RAHIM BILIK A2-14 Jabatan Pengurusan Sumber & Pengajian Pengguna