'Money lending should not be under purview of one ministry only'

Apart from just the Urban Wellbeing, Housing and Local Government Ministry (KPKT), other relevant ministries or government agencies should also monitor the issuance of the moneylending licences, says a consumer activist.

“Maybe the monitoring body should not be just KPKT. Maybe the Domestic Trade, Cooperatives and Consumerism Ministry should also have the purview, so as to protect the interest of consumers,” Malaysian Muslim Consumers Association (PPIM) chief activist Nadzim Johan told Malaysiakini.

Nadzim was responding to a question on whether there was a need for moneylending to be transferred to the Finance Ministry instead, so as to avoid any conflict of interest.

KPKT minister Noh Omar announced yesterday that the ministry was mulling a proposal for housing developers to be issued moneylending licences.

However, Nadzim (photo) pointed to the long-drawn-out issue of Ah Long (illegal loan sharks) when it comes to moneylenders.

Licensed moneylenders themselves, sometimes, engage the services of Ah Long, Nadzim said.

“They use their licences to show that their activities are not illegal,” he said.

And KPKT, on the other hand, has been seen as being “relaxed” when it comes to illegal loan sharks.

“Records have shown how KPKT has failed to curb this problem,” said Nadzim, citing the large numbers of Ah Long present in the country.

“If the ministry is strong, the Ah Long won’t dare to conduct their activities.

“KPKT says that Ah Long should be referred to the police and not to it. Then, for example, should cars that only have licences be referred to the Road Transport Department (RTD)?”

Proposal must be properly spelled out

In light of the highlighted problems, KPKT’s proposal, therefore, must be properly spelled out first, Nadzim reasoned.

“We cannot just simply rush into this thing. KPKT must first refer the matter to the stakeholders.”

Asked whether it would indeed be a win-win situation for both developers and house buyers, as stated by Noh, Nadzim reiterated that PPIM would first like to see a more detailed plan.

“There has been so many cases (of consumers having to deal with Ah Long) as records have shown.

“It’s not like KPKT doesn’t have laws, for there is the Moneylenders Act. But why are there still problems?

“We don’t want the same thing to happen again. I’m just afraid that we will be bound by and trapped with this new proposal,” Nadzim said.

A highly placed source in the government told Malaysiakini that the proposal was never brought to the cabinet.

However, the source reasoned, that the authority over the issue of moneylending licences is vested with KPKT.

“The cabinet's decision is irrelevant because the power of issuing a moneylending licence falls under KPKT, and there is no approval needed (from the cabinet),” the source said.

Moneylenders are governed under KPKT, with loan agreements having to complying with the Moneylenders Act.

In making the announcement yesterday, Noh said he had observed that many house buyers were having difficulty making down payments.

Interested developers, therefore, could start submitting applications for the money lending licence, under the Moneylenders Act (Revised 2011) or Act 400, which falls under the purview of the ministry.

With a moneylending licence, developers can assist buyers for 100 percent or partial financing, while the interest rate should not exceed 18 percent per annum.

Meanwhile, the Consumers Association of Penang (CAP) in a statement today expressed its disagreement with Noh’s the proposal.

Its president SM Mohamed Idris (photo) pointed out how there was only one obvious winner from this scheme - the developers.

Idris said there was no need for developers to give loans to buyers if houses were cheaper.

“It is foolhardy to give loans to people who are at risk at defaulting, just so that the houses can be sold.

“The risk of defaulting will likely be higher with the more expensive loan from the developer,” he said.

Stretching the tenure of the loan, on the other hand, would make the property “astronomically expensive”.

The ministry, as such, was doing no favour to consumers by allowing developers to give out loans.

“If the developers bring down the price of houses, they will be able to sell more units, and only then will it be a win-win situation,” Idris added.

'Interest rates are exhorbitant'

The Malaysia Consumers Movement (MCM), on the other hand, objected to the “exorbitant interest rates” of 12 to 18 percent per annum allowed under the money lending arrangement.

“A purchaser already has access to licenced money lenders, if such a need arises anyway, so why is there a need to create a new segment of ‘glorified’ lenders?” MCM president Darshan Singh Dhillon asked in a statement.

Should KPKT decide to go ahead with its proposal, Darshan stressed, then 10 percent deposit requirement to should be maintained.

“If a purchaser is not even able to comply with this requirement, how would he or she be expected to pay the monthly instalment in the longer term?”

The loans, on the other hand, should only be limited to properties that have been completed.

“(Also), strict criteria must be imposed and publicly disclosed before a developer is allowed to quality for such lending arrangements.

“We definitely would not want to see developers with unproven track records turn into money lenders,” Darshan added. - Mkini