Why are banks still ‘selling’ pre-printed forms?

By Chang Kim Loong

The National House Buyers Association (HBA) concurs with the Bar Council of Malaysia’s statement that it is high time for banks to review its practice of imposing fees for loan documents.

We have on Oct 3, 2019 reported on this but it seems our pleas fell on deaf ears. Prior to it, we have on as early as year 2013 written several articles on the issues related to ‘Simplified housing loan agreement’ as well as HBA stand against banks sale of forms.

(Banks in this context refers to commercial banks, Islamic banks, other financial institutions and financial service providers).

Law firms undertaking bank’s work had to purchase standardised pre-printed forms or, typically download the documents from the bank’s portal for a price.

The prices range from RM100 to RM500. There are instances where the price is higher.

Typical pricing of documentation for housing loan

Such expenses are, of course, passed down to the customer/ borrower as disbursements, usually under the column ‘purchase of bank’s printed forms’.

Couldn’t a soft copy be made available to law firms to adopt and print at their own cost and expense?

After all, printing charges are only limited to RM50, as approved by the Bar Council.

PEMUDAH Technical Working Group on Getting Credit (TWGGC)

We had the opportunity at a recent meeting on Apr 28 in PEMUDAH: Technical Working Group on Getting Credit (TWGGC) initiated by Malaysia Productivity Corporation (MPC) to reiterate our stand to the committee.

The bankers, at the meeting had the audacity to suggest that banks are not prohibited to charge ‘fees’ on standard loan documents.

They even elaborated that there are no regulations forbidding banks from doing so. If such acts are allowed, when attempting to regulate, there will be an issue of competition, as alleged by the banker.

They even emphasised that BNM does not have power over the Competition Act, 2010.

BNM, stood by the bankers and even clarified that banks do not sell standard forms but the ‘fees’ levied reflect the actual costs incurred in ‘developing standardised loan documents’.

There is manpower involved in reviewing the documents and thus, the cost is recovered via the ‘fees’.

This sale of standard form for a ‘fee’ has been going since 2013. Surely, such costs must have been amortised over a period of time.

Must the banks continue to profit from sale of forms? Isn’t their major source of income derived from giving out loans?

Surely, bringing the Competition Act into the equation has got nothing to do with sale of printed forms.

Contrary to BNM’s assertion that the banks do not sell the forms, don’t the act of charging a ‘fee’ imply the forms are sold ‘at a price’ which in this case is referred to as a ‘fee’.

BNM’s policies have always been in line with the government aspirations especially when it comes to allocating funds for promoting affordable housing category.

Then, why are buyers of affordable housing still having to stomach the ‘fee’?

Standardised terms and conditions

Most house buyers will require financing to buy a home.

While there appears to be stiff competition among banks for market share and interest rates may be kept low, house buyers are ultimately at the mercy of banks when it comes to the detailed terms and conditions of the housing loan with the legal jargon.

We have been urging banks in Malaysia to be fair and more transparent in their dealing with borrowers for a while now.

Hence, credit must be given to participating banks for finally agreeing to adopt a ‘standardised template’ for housing loans with simplified language that is easy for the layman to understand. That was in 2013.

Since then, we have been calling for the quantum of RM500,000 threshold for the loan agreement to be removed, as the agreement should be applicable for all housing loans regardless of the amount, as the type of the loan documentation is the same.

Already most landed houses in the Klang Valley, in areas such as Puchong and Kota Damansara, cost more than RM500,000.

Hasn’t the price of houses increased substantially over the past 10 years since the template was first formulated?

Why not extend the coverage to all housing loans regardless of the purchase price? After all, it’s the same standardised terms and conditions.

Exorbitant fees for simple letters

The banking sector in Malaysia is a very tightly regulated industry. Any fees that banks intend to charge must be approved by BNM.

It is disheartening to note that borrowers continue to be charged exorbitant fees even under the watchful eyes of BNM.

Instances of borrowers being charged unreasonable fees for copies of redemption statements and EPF statements are common.

For too long, loan borrowers have been at the losing end as many do not fully understand the terms and conditions (T&C) stated in housing loans or financing contracts.

Even if they do understand them, they know all too well the bargaining power is not in their hands.

They have to accept those terms or risk having their loan applications rejected.

In reality, the bargaining powers of the parties to a loan agreement are different and never equal.

The parties seldom deal on equal terms. In today’s commercial world, the reality is that if a customer wishes to buy a product or obtain services, he has to accept the terms and condition of a standard contract prepared by the other party.

The parties in the instant case, are no different. They have unequal bargaining powers between the banks and their customers.

It is unconscionable on the part of the bank to seek refuge behind the clauses and an abuse of the freedom of contract

Thus, when Bank Negara Malaysia (BNM) stepped in and voiced their concerns over mortgage agreements which are disproportionately skewed towards banking institutions, the National House Buyers Association (HBA) applauded the move.

BNM has on Nov 6, 2019 come up with a policy document titled: Fair Treatment of Financial Consumers (FTFC)outlining how the banks should be responsive to the needs of financial consumers and to conduct their businesses in a way which engenders trust and confidence leading to a high customer satisfaction and retention and hence, leading to sustained business performance over the long term.

That’s a real mouth full (pun intended).

Appendix 1 to the FTFC policy statement states inter-alia:

Sub-para (d): ‘does not impose excessive or unreasonable fees and charges that do not reflect the actual costs incurred in the provision of services offered or which significantly disadvantage certain groups of financial consumers’.

Has those policy statements been translated to actual and factual adherence?

Has BNM conducted their annual audit check on banks including compliance and adherence of the newly minted ‘consumers friendly policies’?

Has BNM or at the least with the assistance of ABM and AIBIM identified the ‘good’ verses ‘poor’ practices to arrive at ‘fair’ practices?.

BNM to balance the scale

Surely, BNM cannot be waiting for the Federal Court to intervene again before it decides to act on it just like in the case of the British borrower Anthony Lawrence Bourke and wife who succeeded in declaring that it was unconscionable for banks to seek refuge behind exclusion clauses.

BNM must lead and spare a thought for the borrowers and law-firms who are often at the mercy of this unequal bargaining with the banks.

BNM has a comprehensive legal power to regulate, to supervise and monitor all participating financial systems and to crack their whip.

Similarly, the Ministry of Finance, ABM and AIBIM have a legitimate interest in the final shape of the banking industry as being one that is principled and ‘customer friendly’ and we sincerely hope banks heed the call.

Datuk Chang Kim Loong is the Hon. Secretary-General of the National House Buyers Association.

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