tag:blogger.com,1999:blog-46401774643201535262024-03-06T00:37:11.351+08:00Debt Tales: The Bank And YouAbu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-4640177464320153526.post-41545028560176282862014-11-18T17:33:00.000+08:002014-11-18T17:33:14.267+08:00Legal Action Procedures - Hire Purchase Loan (Motor Vehicle) - Part 5 - Continue Payment<div class="separator" style="clear: both; text-align: center;">
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<strong><u>THE "CONTINUE PAYMENT" PHENOMENA</u></strong></div>
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Whoever has studied the concept of "marketing" or basic economics, will stumble upon these magical words such as "needs and wants" , "supply and demand" and "niche market". You may be wondering why all the sudden are we talking about marketing? There is a reason for it and it is relevant to our topic. So please bear with me for a while. Back to marketing. When there is a need for a particular product or service, obviously there will be a demand for it. If it is not available in the "mainstream" market, the consumer will look for individuals/entrepreneurs or a company who will be able to supply such unique product. Words got around that such product is available through "special channel" and eventually the product will be popular and become a "niche market" for its "enthusiasts".</div>
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<strong style="line-height: 23.7999992370605px;"><u>CONTINUE PAYMENT THEN AND NOW</u></strong></div>
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A quite popular "service" nowadays which can be categorized as a "niche market" is the services of "Continue Payment" for cars still under financing when the original owners could no longer afford the monthly payment and pass it on to the "new owner" without any actual change of "ownership" through the proper channel where the Bank is still the <span style="line-height: 23.7999992370605px;">ultimate owner.</span><span style="line-height: 23.7999992370605px;"> This practise has been around for a long time most probably ever since car loans be</span><span style="line-height: 23.7999992370605px;">comes "mainstream".</span><span style="line-height: 23.7999992370605px;"> The only difference between then and now is that during the old days, it was a "hush hush" affair and was done between friends and relatives and through "small time" brokers ("mobile consultants") or used car dealers who helped with some form of "documentations" for a fee. </span></div>
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<span style="line-height: 23.7999992370605px;">The "New Buyer" will be asked to pay a certain amount or to update the arrears in instalment with the Bank as "deposit" and an agreement will be signed between the "New Buyer" and the "Old Owner" where the remainder of the monthly instalments will be paid by the "New Buyer". All insurance and road tax matters will be handled by the "Old Owner" as the registration of the car is still under his/her name. In the old days the "agreement" is normally hand written and signed by both parties with witnesses from each side. In some cases the "Payment Continuer" was the used car dealer who has "bought" the car and will only settles the loan when the car is sold to a new buyer with a loan from another or the same Bank. </span><br />
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<span style="line-height: 23.7999992370605px;">One of the main problems apart from the risk of non payment and illegal activities involving the car is the difficulty in renewing the road tax and insurance. During those times the Bank will keep the registration card which is essential for road tax renewal (sometimes there are cases in those days road tax renewal was done without it. Hmm.. some form of magic stuff here.....) The Bank will insist in the instalment being "up to date" before allowing any road tax renewal. A bigger problem for the "Old Owner" which has been mentioned previously is the risk of the "New Buyer" unable or unwilling to continue with the instalment payment and decided to pass on the "burden" to another person with their separate little agreement and the process continues until it reaches a local "warlord" or "mafia" or "whatchamacallit" who has some "influence" in his community. The car shall remain his "property" without having to pay a single cent until the Bank decided to "buy it back" (repossession is normally not an option here) for a hefty price if it is still worth doing so and proceed to sue the Hirer for the whole amount plus the "extra cost" or just "Let It Be" and still sue the pants off the Hirer.</span></div>
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<span style="line-height: 23.7999992370605px;">Now times has changed and with the advent of modern technology, this "service" is even offered in the open through social media and sometimes in the local newspaper. Realizing the weaknesses of the "continue payment" model, a few "improvements" and "innovations" has been introduced to sort of mitigate the risks involved even though it could not negate the fact that it is an offence under the Hire Purchase Act and the Bank is the actual owner of the vehicle. They are detailed below:</span></div>
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<span style="line-height: 23.7999992370605px;">1) The agreement or the "handing over" of the car is accompanied by a police report so that in any circumstances the car is involved in illegal activities or the "New Owner" decided to give the car to somebody else (even though the "New Owner" may do the same thing as anybody can make ANY report) it is "easier" to trace the "last person" who has the car. The downside is that this is the proof needed by the Bank to charge the Hirer with fraudulent sale of the car. More on that later.</span></div>
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2) The agreement is more "professional" looking with words that can only come from legal documents. Maybe the agreement is drafted by someone who is familiar with legal terms or drafted by Mister Lawyer himself. The only thing is, if it is indeed drafted by Mr Lawyer, would it be odd since he/she would know that the Hire Purchase Act will supersede or override all other side agreements and will not negate or discharge the Hirer and Guarantor from their obligations. For what it is worth, the "continue payment" agreement will be duly stamped which may give some comfort or "the feel good factor" on its "security" even though obviously that is not the case.<br />
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3) The problem of insurance and road tax renewal is a thing in the past as online services like "MyEG" will do it for you without the registration card. The Bank no longer has the right to keep the registration card which used to be their "secret weapon" to get payment from the Hirer. This is provided for by Section 4E under the Hire Purchase Act<span style="line-height: 23.7999992370605px;"> 1967 (Amended 2010) as shown below:</span></div>
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<strong style="line-height: 23.7999992370605px;"><u>THE BANK'S REACTION TOWARDS "CONTINUE PAYMENT" ARRANGEMENT</u></strong></div>
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<span style="line-height: 23.7999992370605px;">In a "continue payment" arrangement, as long as the payment is made on time with no illegal activities involving the car and barring any major accident, the case can be considered as "safe". For the Bank, a</span>n account with prompt payment will rarely attract attention. The Bank will know something is wrong when:</div>
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<span style="line-height: 23.7999992370605px;">1) The account becomes overdue for months and the car is untraceable. Typical "alarm bell". After being bombarded with calls and threats of legal action, the Hirer finally confessed that the car has been given up for "adoption" via a "continue payment" arrangement.</span></div>
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2) The guarantor "broke his/her silence" after being fed up with the continuous calls and threats of legal action.</div>
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3) The car may be involved in criminal activities such as robbery, smuggling, drug related and other illegal acts and impounded at the police station. Normally the Hirer will be arrested or brought to the police station as the car is registered under his/her name. After some interrogation, he/she will admit that the car has been given to a third party. The police may also call the Bank directly on the matter and the truth will come out.</div>
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4) The car is involved in an accident requiring an insurance claim either a "total loss" or "repair" claim. The Bank will be contacted by the Insurance Company or the claim workshop on the matter being the "real" owner of the car.</div>
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5) As a result from a site visit by the "CSI" team to the Hirer's house, "concerned" neighbours revealed that they "have not seen the car for a while" or "he sold the car already" and some other information not relevant to the car. They seemed quite happy to have some "new material" to gossip on.</div>
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6) The Bank receives a "mysterious" call giving information on the "continue payment" activity. This can happen regardless of the payment pattern. Could be from the guarantor or a "concerned"citizen or even the Hirer himself who may have second thoughts about the deal which the Bank will definitely investigate.</div>
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Upon knowing the information especially when the account is overdue, the Bank will mobilize all its "assets" including the repossession agents and the "CSI" team to retake the car or any other appropriate <span style="line-height: 23.7999992370605px;">action</span><span style="line-height: 23.7999992370605px;"> including whether there is a need for a "buyback" arrangement. Fast action is needed to avoid the loss of the car and potential higher losses.</span></div>
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<strong>WHAT IS THE PENALTY FOR "CONTINUE PAYMENT" ARRANGEMENT UNDER THE HIRE PURCHASE ACT?</strong></div>
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Section 38 of the Act states that:</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMdM67aBrn7-rzXKmHpbE0hUw9QPmrx2M9NpwxL0CYWaRihd1rt08N2N4jXZpVTekbNLRdlSKoRRzhQF4S2wblYsp5R7sfJfVLxpOiuQhLv5-c2TJ1HiH3YiCYjXBinsxuC-ZQdQP6ZMw8/s1600/fraudsale.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMdM67aBrn7-rzXKmHpbE0hUw9QPmrx2M9NpwxL0CYWaRihd1rt08N2N4jXZpVTekbNLRdlSKoRRzhQF4S2wblYsp5R7sfJfVLxpOiuQhLv5-c2TJ1HiH3YiCYjXBinsxuC-ZQdQP6ZMw8/s1600/fraudsale.jpg" height="150" width="400" /></a></div>
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<span style="background-color: white; line-height: 23.7999992370605px;">Below is Section </span><span style="background-color: white; line-height: 23.7999992370605px;">16(2) (in the red box) where the Bank need not comply with Section 16(1) to repossesses the car if there is reason to believe the car is removed or concealed by the Hirer. The <b>BURDEN OF PROOF</b> of such act however, lies upon the Bank but as we can see earlier, this is not difficult to obtain.</span><br />
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Here is the dilemma for those involved in the "continue payment" arrangement. I have mentioned earlier that in order to "strengthen" the arrangement, the "handover" of the car can be made at the local police station together with a police report and a "sale and purchase" agreement. This is the proof needed by the Bank to use Section 16(2) above. A real "catch 22" situation.</div>
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The Bank can also use Section 37 below:<br />
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<span style="line-height: 23.7999992370605px;">So there you go. Enough provisions in the Act enabling the Bank to take action even on the basis of suspicion that the car is no longer in the possession of the Hirer.</span></div>
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<strong> <u>"CONTINUE PAYMENT" A LA BANQUE OR THE BANK'S STYLE</u></strong></div>
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One may wonder that with the all the risks associated with the "continue payment" scheme, would there be any solution from the Bank? In actual fact, there is. Take a look at this provision:</div>
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The Bank's version of the "continue payment" scheme is no different from applying for a new loan. The "new buyer" would have to fill in the application form, submit the supporting documents and if everything "checks out" or in order, then only the assignment is approved and a bunch of documents to sign. For those who are blacklisted or even declared a Bankrupt, don't even think of applying. That is why the "unconventional" scheme of "continue payment" is popular where anybody can apply as long as you have the cash and the choice of cars is nothing short of extraordinary with "marquee" and other popular models. Common sense will tell you that why go through all the trouble to do the assignment when you can apply for a new car or a better model? </div>
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<strong><u>CONCLUSION</u></strong></div>
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Based on the facts given above, the "niche market" for the "continue payment" business is here to stay. It is far more "flexible" than the Banks' even though much riskier. Well some say life without some form of danger is of no thrill or excitement. For the "entrepreneurs" of "continue payment" scheme, don't worry, this article won't affect your business whatsoever. There will always be new "qualified" customers who are "not qualified" to apply for Bank loans with cash in hand and high taste of popular models. They will never be short of "suppliers" (i.e. Hirers) who will be stuck with the monthly payment partly due to some "miscalculation" on their part on the monthly commitment. For example, petrol, maintenance, second year insurance (first year insurance was "free" due to inclusion in loan amount) was not taken into consideration when "budgeting" for the "affordibility" of the car. The car was also "free" (100% financing) which lead to the higher amount of instalment. Many succumbed to financial pressure having to pay for higher monthly commitment and the ever increasing inflationary forces. </div>
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Hmm... Fraudulent sale of vehicle and 100% financing. Among the offences committed by the Hirer and the Banks respectively. If the law is enforced strictly (like the recent JPJ vehicle plate number specification operations- up to a millionth of a millimeter accuracy) then we shall see the CEOs, Directors, Managers, Officers, Clerks, Car Dealers and Hirers populating the prison and probably they can start their own Banking system in prison since the "quorum" is complete. To review the various offences and its respective penalties, kindly refer to the topic <a href="http://debttalesthebankandyou.blogspot.com/2014/10/legal-action-procedures-hire-purchase.html" target="_blank">Legal Action Pocedures Hire Purchase Part 1</a> </div>
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Now that is interesting and something to ponder upon. It has been going on for so long. Why you may ask? I don't know. You have to ask the relevant authorities. My "uneducated" guess would be to foster "growth" in the economy and keeping inflation rate in check or so they say. The debt based economy needs continuous borrowings in order to "pay" for the interest of the old debts. Refer to <a href="http://www.slideshare.net/AzharFahruddin/facts-of-digital-and-paper-money-and-how-interest-steal" target="_blank">Facts of Digital and Paper Money and How Interest Steals</a> if you need more clarification.</div>
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Nowadays the Central Bank encouraged Banks not to be over zealous in repossession. Instead Banks are advised to give some breathing space and should be open for negotiations and probably offer some loan rescheduling for financially strapped customers which is actually beneficial for both parties. Processing of new loans is stricter now which is a sure sign of "over exposure" judging from the alarming figure of the household debt. The Banks are also fully aware of the bad experience of "brutal" and "across the board" repossession during the financial crisis of <span style="line-height: 23.7999992370605px;">1997 - 2000 where huge losses were recorded when new loans were frozen (needed to cover for operation costs and to cover the "losses") and disposal of repossessed vehicles at cut throat prices. So they must be extra careful for the next cycle of "economic cyclone"</span></div>
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So ladies and gentlemen, that shall conclude the series on the Legal Procedures for Hire Purchase Loan under the Hire Purchase Act 1967 (Amendment 2010). I hope that the information given is beneficial. Oh ya! I forgot to mention that regardless of the loan status be it "conventional" or "Islamic", both shall be under the purview of the Act and the same goes with other Bank loans as well where all disputes will be referred to and decided by the Civil Courts and not Syariah Courts. Well, the laws of the land was "plagiarized" from British Law and has gone through various amendments to suit the "local flavour" . Furthermore, most of these two "Banks" (Islamic or otherwise) are under the same roof or the same counter "managed" by the same personnel. Luckily the personnel are not wearing "two tones" type of clothing like"Two Face" Harvey Dent in Batman movies and comics. We shall look into the legal procedures in Housing Loan recovery in the next article. </div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-26821397914498976752014-11-15T23:56:00.001+08:002014-11-15T23:57:56.616+08:00Legal Action Procedures - Hire Purchase Loan (Motor Vehicle) - Part 4 - The Public Auction<div style="line-height: 23.7999992370605px;">
<strong><u><span style="font-family: Georgia, Times New Roman, serif;">THE PUBLIC AUCTION</span></u></strong></div>
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<span style="font-family: Georgia, Times New Roman, serif;">After the expiry of the Fifth Schedule, the Bank needs to sell the repossessed car in order to recover back its "principal and costs". Nowadays, the selling will be by way of public auction usually held at the premise of the panel storage facility conducted by a licensed auctioneer complete with his "wooden hammer" or the mallet if you wish to call it as such.</span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">In the old days, auctions were normally reserved for properties in foreclosure proceedings. For cars, it was deemed sufficient to advertise in the local newspapers inviting the public to submit their bid for the listed car by tender and the highest bidder will be awarded the right to buy the car. This method was heavily criticized due to the lack of transparency and allegation of abuses. The main grouse is the manipulation by"insiders" with "insider knowledge" of the tender price where anybody be it the dealers or outsiders who are close </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;"> </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">or "buddy buddy" </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">with the Bank's staff (read: the clerk, officer and manager) can outbid and "undercut" any tender amount submitted as long as the price is equal or higher than the price stated in the Fifth Schedule. </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">Even though it is perfectly "legal" since all the documentation are in order, it is still considered wrong "morally" with nepotism being the popular word of choice nowadays. It is not always the case but it happens especially when the car is in good condition and also a popular model. </span><br />
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<span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">In the event the tenders and bids received are lower than the Fifth Schedule value, the Hirer MUST be notified and given the chance to introduce a CASH buyer before the next tender exercise where the "reserve price" will be lower. The process continues until the car is sold. Normally this happens to a less popular model, a car with potential problems passing the PUSPAKOM and JPJ requirements (engine change without proper documentation, "frankenstein" car or a car under police investigation or released under police bond) or simply the condition of the car is not good. </span><br />
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<span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">That is why the method of selling repossessed cars by public auction is used nowadays to at least allays the fear of non transparency and nepotism tendencies. However, it is still prone to manipulations by a secret pack of "seasoned" bidders who know each other very well and are regulars in every auction event. Even though considered "enemies" (at least during the auction), they can work together for a common goal that is to deny a "newcomer" a chance to buy a car or to swing the auction to their advantage by either pre-meditated or "on the spot" planning. The term "newcomer" is used loosely here in reference to individuals who want to bid for the first time or who has been to a public auction for only a few times or the one who is quite "seasoned" but has become "the common enemy" due to some unfavourable behavioral traits or simply put, a pain in the ass. </span><br />
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<span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">Therefore during the auction and bidding process, the "newcomer" may become a victim of some bullying tactics employed by the secret pack mentioned earlier. No words need to be spoken, they have developed their own communication </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">techniques </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">through some "gestures and sign language" like head scratching, nose touching, hair pulling, nose picking, moustache "massaging" and many others each with its own "meaning" like "Not Interested Move", "Outbid That Guy Move", "Play With The Bid Until That Guy Has to Pay More Move" and many other "Moves" that will give advantage to the interested parties and of course the "Move" will not involve Satay KAJANG or any reference to that particular place. This is not to say that it will happen all the time but suffice to say it happens as with other public auctions.</span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">The public auction will be advertised usually 14 (Fourteen) days before </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">the auction date and the Hirer will be notified accordingly as provided by Section </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;"> </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">18 (4)(a) below:</span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">If the sale of repossessed car is not by way of public auction, the Bank needs to give an option to the Hirer to introduce a buyer to buy the car in<span style="line-height: 23.7999992370605px;"> CASH if the price is lower than the Fifth Schedule value. With the lengthy "cooling off period", the overdue position of the account would have been around 5 (Five) months or more since the Bank may have to wait for other repossessed cars' Fifth Schedule to expire in order to include them in the public auction for obvious reasons of cost saving.</span></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">As you can see above, there are 3 (three) possible outcomes during the auction date:</span></div>
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<span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">1) Auction price is more than the loan amount;</span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">2) Auction price is less than loan amount; and</span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">3) No bidders for the car</span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">You can see for yourself in the info graphic shown the steps taken for each situation.</span><br />
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<strong style="line-height: 23.7999992370605px;"><span style="font-family: Georgia, Times New Roman, serif;"><u>STEPS TAKEN AFTER THE CAR HAS BEEN SOLD</u></span></strong></div>
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<span style="font-family: Georgia, Times New Roman, serif;">We shall elaborate a bit more on the situation where the auction price is not enough to cover the outstanding loan amount. The Bank will contact the Hirer on the matter and request a meeting to discuss a repayment proposal to settle the outstanding sum. If there is no response from the Hirer, the Bank will initiate the normal loan recovery procedures by sending the Notice of Demand and Summons.</span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;"> For revision on the legal process, you can proceed to <a href="http://debttalesthebankandyou.blogspot.com/2014/08/legal-action-procedures-personal-loan.html" target="_blank">Legal Action Procedures - Personal Loan Part 1</a> and <a href="http://debttalesthebankandyou.blogspot.com/2014/08/legal-action-procedures-personal-loan_37.html" target="_blank">Legal Action Procedures - Personal Loan Part 2</a> </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">The procedures are the same so I don't have to repeat it here.</span></div>
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<span style="background-color: white; line-height: 23.7999992370605px;"><span style="font-family: Georgia, Times New Roman, serif;">After all the "ding dong"ing process has been completed, the overdue position would have reached its sixth or seventh month. Investigations by the "CSI" team is still going on for the next course of action if necessary. By this time, the Bank might have obtained </span></span><span style="font-family: Georgia, Times New Roman, serif; line-height: 23.7999992370605px;">Judgment </span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">and may be considering</span><span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;"> executing the said Judgment with the various methods of "execution" if there is no acceptable repayment proposal from the Hirer is received.</span></div>
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<span style="background-color: white; font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">For a detailed mode of "execution" of the Judgment kindly refer to </span><a href="http://debttalesthebankandyou.blogspot.com/2014/08/legal-action-procedures-personal-loan_30.html" style="background-color: white; font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;" target="_blank">Legal Action Procedures - Personal Part 3</a></div>
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<strong><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></strong><strong><span style="font-family: Georgia, Times New Roman, serif;"><u>THE PLIGHT OF THE GUARANTOR</u></span></strong></div>
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<span style="font-family: Georgia, Times New Roman, serif;">As with any other loan, the guarantor shall share the same burden of the debt but not necessarily enjoying the "product" of the debt. A picture is worth a thousand words, they say:</span></div>
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<span style="background-color: white; line-height: 23.7999992370605px;"><span style="font-family: Georgia, Times New Roman, serif;">However, in the Hire Purchase Act 1967 (Amendment 2010), there are a few provisions with regards to the guarantor as shown below:</span></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Wow! Some pretty serious stuff here. Typical legal terms, devoid of commas and reading it aloud may twist your tongue to a certain extent and of course, open to interpretation depending on whose side you are on. It is not known whether any guarantor actually exercise his or her rights in the provisions of the Act. This is because a guarantor is normally close and emotionally attached to the Hirer/Borrower like spouse, friends. business partners, and company directors. Very rarely will you see a total stranger becoming a guarantor to somebody unless it is a fraud or through deception or the person is suffering from a mental condition called "Obsessive Compulsive Guarantor Disorder" (OCGD). The decision to make a counter claim or sue the Hirer may be difficult due to the emotional factors not to mention having to endure the possible lengthy legal process.</span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">Even if the guarantor sues the Hirer for the amount paid, there is no guarantee (pun unintended) that the guarantor will get back what has been paid towards the account. The legal fees and other costs may outweigh the claim so it is not worth the "trouble" as if there is not enough trouble to contend with already. Common sense will tell you that if the Hirer can ignore the"Big Bad Bank" with all its legal might at its disposal, would the Hirer be "interested" in entertaining the guarantor's claim? I personally don't think so. The guarantor might be better off trying to persuade the Hirer to pay up with a"softer" approach rather than the "hard line" approach even though the latter may be necessary in certain circumstances and if the payment made is large enough to be worth the effort. </span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">Whatever the case may be, the guarantor will suffer the most but in the Hire Purchase Act, it is at least "comforting" to know that there are options available for guarantors. Sometimes the Hirer, in an effort to "solve" the problem of non payment, "sells off" or "pass the baton" that is the responsibility to pay the loan to a third party in an arrangement commonly known as "continue payment" which contravenes the Hire Purchase Act. The risk of non payment is high and the guarantor would have to "share" the burden and you already know it is nothing like "sharing" a status in Facebook.</span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">This issue might invoke the following question and it is not "pretty" if you are the guarantor:</span></div>
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<span style="font-family: Georgia, 'Times New Roman', serif; line-height: 23.7999992370605px;">With the above I hereby conclude the series on the Legal Procedures For Hire Purchase Loans with special attention to motor vehicles. I would like to add a bit on the "continue payment" activity which is rampant and actually is an "open secret" in the financial industry. The pros and cons together with its legal implications under the Hire Purchase Act 1967 (Amendment 2010) shall also be discussed. </span></div>
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<strong><span style="font-family: Georgia, Times New Roman, serif;">NEXT TOPIC : THE "CONTINUE PAYMENT" ARRANGEMENT</span></strong><br />
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-22674959879560821522014-10-30T00:45:00.000+08:002014-10-30T23:24:18.851+08:00Legal Action Procedures - Hire Purchase Loan (Motor Vehicle) - Part 3 - Repossession<div class="separator" style="clear: both; text-align: center;">
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<span style="background-color: white; font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.7999992370605px;"><br /></span><span style="background-color: white; font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.7999992370605px;">We have now come to a quite interesting topic as depicted above. There may be some "hot" scenes such as slander, defamation, car chases, vulgarities, fist fights and we may even have some "chair throwing" sessions. Yes, sounds a lot like the current political scene and yes, we are actually "talking" about car repossession.</span><br />
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After taking into consideration the mandatory two months of successive defaults and the issuance of the Fourth Schedule giving the Hirer a further 21 (twenty one) days, plus a few more days allowance for the weekend, public holidays, sick leave, emergency leave and a host of other "leaves", THREE months or more has passed. Finally the Repossession Authority was issued and we assume that the car was repossessed.</div>
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For a clerk or the officer in charge, this is supposed to be a "happy moment" where the asset of the Bank has been "recovered". However, there will always be a feeling of anxiety and uncertainty of what is coming his/her way when the car, the Repossession Agents and <span style="line-height: 23.7999992370605px;">the Hirer who may be accompanied by some "concerned" and "angry" mobs complete with sickles, torches, pitchforks and rakes just to name but a few to "discuss" matters.</span><br />
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<span style="line-height: 23.7999992370605px;"><span style="line-height: 23.7999992370605px;">Among the requirements for a </span><span style="line-height: 23.7999992370605px;">Repossession Agent after repossession is to make a Police report and then proceed to the Bank for car inspection and photography session. The inspection will focus on the engine and chassis numbers of the car, the overall physical condition of the car recording whatever visible defects such cracks, dents, engine condition as well as making a list of the Hirer's personal belongings. Upon inspection, the car will be sent to the Bank's panel storage facility who will do the same type of inspection. This is very important to protect the Bank's and the store's interest in the event of any counter claim made by the Hirer.</span></span></div>
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There are some cases where upon repossession, the car is sent to the store directly due to some security concerns and usually because the car is being chased by some angry mob where inspection will be done later at the store. For a "seasoned" clerk or officer, such situation (events after repossession) will not surprise them anymore. If there is a new clerk or officer or any staff who has just been transferred to the collection department, they will be "released" to face the situation in order to give training in self composure, crisis management as well as to "harden" the heart. (Yeah, right). The pecking order to face the situation is more or less like the accounting principle of LIFO (Last In, First Out - most junior first) which is of course under some form of supervision (watching from a safe distance) if the situation gets out of control.<br />
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When the "party" of Repossession Agents and the Hirer most probably with his/her "entourage" finally arrived and if there is any commotion, the clerk, the officer and the"Pak Guard" (security guard) will try to diffuse the situation by being the umpire or referee of a possible slinging match. Being a referee would have its own risks and hazards where the referee may be caught in the "crosfire" or "friendly fire" or even "unfriendly fire" when adjudged to be biased by either side of the "warring" party. Whatever the case may be, when things have cooled down a bit, discussions and negotiations can commence with each party given the chance to present their "facts of the case" and again, the Bank's representative being the "judge" (no more refereeing) on the issues raised.<br />
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Below are the excerpts of each party's chronology of events leading to the repossession based on a true story but has been "remixed" and adjusted accordingly:</div>
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<strong><u>REPOSSESSION AGENT'S VERSION</u></strong><br />
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This morning my colleagues and I stumbled upon (Yeah right. They have been following the bloke for days to study his movement patterns) the Hirer presumably on his way to work. We followed the car and waited for a suitable time to "greet" the hirer. <br />
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When the car has been parked, we approached the hirer and greeted him with our best smiles and pleasantries. We introduced ourselves as the agent of the Bank showing him our identity cards, authority cards, certification from AHPCM and the Repossession Authority. We politely asked for the car keys and offered him to come with us to the Bank. However, despite our extreme politeness, the Hirer, without any provocation was hostile towards us and started to hurl abuses. Being sensitive guys, we were hurt by such foul language used which reminds us of the song "Hurt" by the Manhattans. (If you are below 40, you may have to look it up in Youtube). Despite the abuses, we tried our level best to persuade the Hirer to hand over the keys but the Hirer still refused to cooperate and continued with the abuses and further insulted us with the words "bloody idiots who never went to school", "lazy bumps, that's why you morons ended up with this lousy job" and other insults which we may have to sensor because of its X-rated contents as we are not used to such filthy language.<br />
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Before losing our patience and with a heavy heart we have no choice but to wrest the car keys from the Hirer while one of my colleagues gathered the Hirer's personal belongings from the car into a plastic bag before handing it over to him. We left the Hirer there since he refused to follow us to the Bank and proceeded to make a police report before coming here. We asked for a higher repossession fee due to the difficulty of taking back the car, the gangster mannerism of the Hirer and the mental and spiritual abuses we have to endure. One of my colleagues even cried while on the way here. That is our story and all of it is true.</div>
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<strong><u>THE HIRER'S VERSION</u></strong></div>
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This morning while on the way to work I realized that a car with two or three suspicious looking characters possibly with malicious intentions was following me. After I reached my office and parking the car I was approached by two goons demanding me to get out of the car. Before I was able to react, one of them opened the car door and took the car keys from me. One of them showed me his id card and some sort of Authority card in a flash and then threw the Repossession Authority to my face. I pleaded with them to give me a chance to go to the Bank to settle the matter but they refused and hurl abuses towards me. They were very rude and the language that they used can make a grown man blush with shame.<br />
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While I was discussing with those men, another one of them took out my personal belongings and handed it to me saying if I am not satisfied, I can come to the Bank and sort it out and left me there flabbergasted. I am very sad, disappointed, stressed out and almost died of embarrassment since there were a lot people around when it happened. I know I was wrong but I don't deserved to be treated in such a way. For your information, I kept two gold bangles, a golden ring and RM2,000 under the front seat of the car and now it is gone. I demand compensation and harsh punishment for your Agents for being rude and robbing me of my valuables. I have already told my mom, the police and the village head and all my Facebook friends about this and some of them are here with me including my mom to lend me some moral support. I demand justice for me and other Hirers who may face the same predicament.</div>
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<strong><u>BANK OFFICER/CLERK VERSION (DEPENDING ON THE SITUATION)</u></strong><br />
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.7999992370605px;">I just got to know about this repossession about an hour ago since the Repossession Authority was issued by Head Office. Nowadays it is the Head Office who issues the </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.7999992370605px;">Repossession Authority</span><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.7999992370605px;"> in line with Bank Negara's (Central Bank) latest guideline on tightening the loan recovery procedures (Yeah, it is always "good" to "tai chi" or "push" the blame on "Head Office" or even "Bank Negara", entities unreachable by most borrowers). We used to</span><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.7999992370605px;"> only "bother" about accounts that are more than three months overdue.We have no choice but to follow the guidelines. You (the hirer) have not paid a single sen towards the account despite our sms, reminders and phone calls (the first "whole truth" statement) so it is quite difficult for us to sympathize with you. </span></span><br />
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.7999992370605px;">With regards to our Agents, they have been trained to be courteous and act according to the guidelines. However, if there is a mistake made by them, we wish to apologize and shall give them a stern warning (have to "back up" the Agents if it is apparent the Hirer is pulling a fast one). On the missing items, kindly lodge a report and let the police investigate as this a very serious allegation. After discussion with the manager and after careful consideration, repossession fee is set at RM500.00 (normally the Agents will make some noise on the "low" fee but a promise of more "easy" Repossession Authority will keep them quiet for a while. They are just trying their luck most of the time) There have to be some "give and take" on the part of the Bank and Repossessors otherwise it would be quite difficult to work together.</span></span><br />
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<strong><u>CONCLUSION</u></strong><br />
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The above scenario is just an example of a myriad of situations when a car is repossessed. You cannot trust the agent or the Hirer 100% so sometimes a bit of experience and "gut feeling" is essential to come up with the right or "almost right" or "totally screwed up" decision. With regards to the repossession fee, it depends on a lot of factors such as the amount overdue, months overdue, the degree of "difficulty" in getting the car back which may include a "buyback" deal involving local warlords or "Don Corleones" or "Little Napoleans" or whatever "whatchamacallit"who has "jurisdiction" or a "caveat" over the car usually bought over hand to hand from a "continue payment" deal gone sour. There are also cases where it is the Agent who will take the car from the Hirer and will keep it for months for "fermentation" until it is "ripe" enough to command a higher repossession fee and of course such Agents are not tolerated and will be blacklisted by the Banks and AHPCM.<br />
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Whatever it is, when a car has been repossessed, the Bank must sent a Notice called the Fifth Schedule as provided in Section 16 (3) of the Hire Purchase Act 1967 (Amendment 2010). This is an excerpt of the Section:</div>
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<span style="line-height: 23.7999992370605px;">The Fifth Schedule must be sent within 21 (twenty one) days from the date of repossession. Otherwise, the Bank will lose its rights in the Hire Purchase agreement. However, if the Hirer exercises his/her right to take back the car, the Hire Purchase Agreement shall continue as if the Fifth Schedule has been sent.</span></div>
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In Section 17 (1) , Bank is not allowed to sell the repossessed car without the consent of the Hirer before expiry of the 21 (twenty one) days given in the Fifth Schedule. The ones in the red box that is Section 17A and 17B are about the "permit" or permission given to the Registered Repossession Agent as discussed previously.<br />
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Below is a sample of a Fifth Schedule:</div>
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<span style="background-color: white; line-height: 23.7999992370605px;">The Fifth Schedule has two main parts or rather choices given to the hirer. We shall look at the first part which is shown below:</span></div>
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<span style="background-color: white; line-height: 23.7999992370605px;">This part gives the Hirer the opportunity to "reactivate" the Hire Purchase Agreement by paying all the arrears in instalment, late charges and other costs.</span></div>
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The second part gives an option to full settle the loan after taking into consideration the repossession cost, storage costs and other incidental costs after deducting the statutory "rebate" calculated beforehand. The excess or shortfall that is due to the Hirer and the Bank respectively if the car is sold at the estimated price given is also stated in the Fifth Sxhedule. The estimated market value is equivalent to "Forced Sale Value" where it depends on the condition of the car. The Bank will usually give a "conservative" value as a precautionary measure in the event the car fails to attract any bidders during the public auction.<br />
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The Hirer also has the right to give a notice in writing to the Owner/Bank within the 21 days before the expiry of the Fifth Schedule to introduce an individual who wants to buy the car at a price not less than the Fifth Schedule's estimated value in CASH. This right is provided for in Section 18 (1)(a)(ii) :</div>
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<span style="background-color: white; line-height: 23.7999992370605px;">Upon expiry of the Fifth Schedule, the Bank is free to sell the car. How is it done and what is the Bank's next course of action? We shall continue in Part 4...</span></div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-74954319977721819342014-10-28T18:23:00.000+08:002014-10-28T18:23:46.802+08:00Legal Action Procedures - Hire Purchase Loan (Motor Vehicle) - Part 2<div style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.7999992370605px;">
Here we are. The loan recovery procedures for Hire Purchase loan. Full slides in Powerpoint format can be obtained from <a href="http://www.slideshare.net/AzharFahruddin/loan-collection-procedures-for-motor-vehicles-hire-purchase-act-1967" target="_blank">here</a> or from the Facebook Album collection <a href="https://www.facebook.com/abu.ammar.79/media_set?set=a.793756517336793.1073741837.100001073559493&type=3" target="_blank">here</a>. We start with the introductory slide of our topic:<br />
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Should anybody wants more information on the "Source of Funds" kindly refer to this <a href="http://www.slideshare.net/AzharFahruddin/facts-of-digital-and-paper-money-and-how-interest-steal" target="_blank">Facts about Digital, Physical Money and Interest/Usury</a><br />
<a href="http://www.slideshare.net/AzharFahruddin/facts-of-digital-and-paper-money-and-how-interest-steal" target="_blank"><br /></a></div>
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As with any other loans, we begin with a joyous occasion of getting the loan approved, money has been disbursed and the car has been delivered. The day of disbursement shall then be the day the agreement officially commences. Such a "happy" occasion can be reviewed in the previous article entitled <a href="http://debttalesthebankandyou.blogspot.com/2014/08/part-5-collection-department.html" target="_blank">Part 5 - The Collection Department</a> At this time, the Bank already "collected" the first interest/usury for the month. You can refer to <a href="http://debttalesthebankandyou.blogspot.com/2014/10/legal-action-procedures-hire-purchase.html" target="_blank">Legal Action Procedures - Hire Purchase Loan (Motor Vehicle) - Part 1</a> for more information on the interest/usury structure.</div>
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<span style="background-color: white; line-height: 23.7999992370605px;">We will make an assumption that in our example, there has been no payment received from the Hirer from the very beginning. This will make it easier to see the flow of the legal action taken. During the first month of default, the loan is still considered "new" and the Bank will give the Hirer the benefit of the doubt where the standard reminder, text messages will be sent. Phone calls will also be made to remind as well as to check whether the phone is still functioning. Late charges and reminder costs are automatically calculated.</span></div>
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<span style="background-color: white; line-height: 23.7999992370605px;">As soon as the account is two months overdue (depending on weekends and public holidays and the person in charge is alert enough) the notice called Fourth Schedule will be printed as stipulated in the Hire Purchase Act in Section 16 giving the Hirer 21 (twenty one) days to update the arrears in instalment:</span></div>
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<span style="background-color: white; line-height: 23.7999992370605px;">What is shown above is only part of Section 16 of the Hire Purchase Act. Section 16 in full is given below:</span></div>
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The Section 16 (2) above (in the red box) will be discussed in more detail in a separate topic entitled "Continue Payment". For now, we will look into the Fourth Schedule and other related notices. Below is the sample of the Fourth Schedule:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwW1UVFSy8gNqs94opW0tA28dW4wvk7g34ESENTLr7xR8N3JFb4pqusPX0EwGS2QXUel4aXfPdnlmYQiOmvBLaOwySfB-alVRLuzOiuufV8EVinw8HHwuD5OcUgbYjkR4kJIwUW_OZbzYA/s1600/fourthschedule.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwW1UVFSy8gNqs94opW0tA28dW4wvk7g34ESENTLr7xR8N3JFb4pqusPX0EwGS2QXUel4aXfPdnlmYQiOmvBLaOwySfB-alVRLuzOiuufV8EVinw8HHwuD5OcUgbYjkR4kJIwUW_OZbzYA/s1600/fourthschedule.jpg" height="400" width="331" /></a></div>
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As you can see in the Fourth Schedule, if the Hirer voluntarily surrenders the vehicle, the cost of repossession, the cost incidental to taking possession and the storage cost <b>WILL NOT</b> be charged. After 14 (fourteen) of the issuance of the Fourth Schedule, another Notice called the Notice of Intention to Repossess will be issued which also serves as an additional reminder that the Hirer has only 7 (seven) days left to make payment failing which repossession will take place. This notice can be regarded as an additional "cushion" for the Banks that they have given enough alerts and reminders in case the Hirer makes any claim of not being "sufficiently" reminded. These notices will be sent by registered post<span style="line-height: 23.7999992370605px;"> as proof of posting to the last known address of the Hirer and Guarantor (if any) </span><br />
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<span style="line-height: 23.7999992370605px;">This is a sample of the Notice of Intention:</span></div>
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<span style="background-color: white; line-height: 23.7999992370605px;">Please be reminded that under Section 16(1), the above notices can <b>ONLY</b> be sent if there is <b>TWO SUCCESSIVE </b>defaults in instalments (not </span><span style="background-color: white; line-height: 23.7999992370605px;">1 1/2 instalment or part thereof. That is why Banks may not accept partial payment unless in unavoidable circumstances for fear of "interpretation" issues in the event of disputes). Another factor to consider is that if the Hirer has paid a total of 75% of the CASH PRICE of the car, the Bank would have to apply for a Court Order in order to issue the Fourth Schedule. "What? Run that by me again" you might say. Kindly refer </span><span style="background-color: white; line-height: 23.7999992370605px;">to the table below:</span><br />
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<span style="background-color: white; line-height: 23.7999992370605px;">Based on the above table, the cash price of the car is</span><span style="background-color: white; line-height: 23.7999992370605px;"> RM60,000. If the Hirer </span><span style="background-color: white; line-height: 23.7999992370605px;">has paid up to</span><span style="background-color: white; line-height: 23.7999992370605px;"> 72 months (6 years), he/she would have paid 75% of the cash price. (now this is THE "math" that is taught in schools). This also means that the Bank CANNOT issue the Fourth Schedule if the Hirer fails to pay instalments number 73 and 74 (successive) and need to apply for a Court Order to do so. Bummer! It will be cumbersome not to mention time consuming even though the car may be parked in front of the Bank everyday. By the time the Court Order is obtained, the car may be long gone "riding on the sunset". </span><br />
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<span style="background-color: white; line-height: 23.7999992370605px;">However since in our example no payment is received since the inception of the loan, these Notices can therefore be issued.</span></div>
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We continue to the next step. After the expiry of the Fourth Schedule in 21 days, the account would have been 3 (three) months overdue. The Bank can now issue the Repossession Order or Repossession Authority to the Repossession Agents. Nowadays the Repossession Agents are required to be registered with the Association of Hire Purchase Companies Malaysia (AHPCM) . These agents will be given an "Authority Card" by the Banks as well as the certification by AHPCM as proof that they are authorized to carry on the repossession assignment. This is due to some "unpleasant" reputation of some Repossession Agents over the years with regards to the manner in which cars has been taken or in some cases, "stolen" from the Hirers.</div>
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AHPCM and the Banks has come up with quite a comprehensive guidelines of the "Do's and Don'ts" for the Repossession Agents in order to minimize repossession incidents not according to the proper procedures. Listed beloware the guidelines taken from AHPCM's <a href="http://www.ahpcm.com.my/appliform.html" target="_blank">website</a><br />
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<span style="font-size: small;"><u>CODE OF ETHICS FOR PERMIT HOLDER ON REPOSSESSION</u></span></h1>
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1. (a) permit holders must ensure that they are in possession of current and valid permit during the course of carrying out repossession work.</div>
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<br /> (b) as far as possible the number of authorised permit holders performing repossession activities must be minimized unless circumstances warrant any additional assistance.</div>
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<br /> (c) repossession work can only be carried out daily from 9 am to 9 pm.</div>
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2. Permit holders issued with a repossession order by owner should only gain entry into premises with the knowledge and consent of the occupant. Trespassing into private property is not allowed without a court order obtained by the owner.</div>
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3. Permit holders issued with a repossession order by the owner should be well mannered and dressed decently. They should ensure the practice of professionalism and dignity in carrying out their work.</div>
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4. The use of ‘strong arm tactics’ of any kind is strictly prohibited in the performance of their work.</div>
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5. At the time of repossession, the permit holders should:</div>
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(a) Produce his permit, national registration card and give a standard notice to the hirer informing him of the address and telephone number of the legal owner and the authorised officers he/she can contact immediately to resolve any problem.</div>
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(b) give a reasonable time to the hirer to inspect the motor vehicle or goods and remove his personal items and belongings.</div>
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(c) take photographs of the interior and exterior of the motor vehicle or goods and provide such photographs to the legal owner.</div>
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(d) cause to be issued an inventory list to state the status and the condition of the repossessed motor vehicle or goods.</div>
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6. As far as possible repossession should be undertaken in the presence of the hirer or any person authorised to use that motor vehicle or goods.</div>
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7. A police report on the repossession should be lodged as soon as practicable and preferably within 24 hours but in exceptional circumstances, not later than 48 hours from the time of repossession.</div>
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8. Permit holders issued with a repossession order by owner should at all times act in accordance with the laws, regulations, terms and conditions, code of ethics and guideline issued by the Controller in the performance of their repossession activities.</div>
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9. Permit holders should also observe any other Code of Ethics or Guidelines issued from time to time by the Controller.</div>
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I believe that the Agents have done their level best to follow the guidelines above since they know they are being watched and a slight mistake may render themselves out of the job and they themselves would prefer a "hassle free" repossession. However, in my previous article <a href="http://debttalesthebankandyou.blogspot.com/2014/08/part-5-collection-department.html" target="_blank">here</a> you might still remember that the Hirers or Borrowers have their own set of "personality traits" which may invoke different reactions from these repossession agents.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVgtGy-urTOH2ciitP9NQ51K-HaeMpHetLK3LrmgBeEsBep4vMrRrAeA3J8Zxl1n7Ed8LAOJVJxJx57ob43WT1zHLE6QPgCkuJL6aTWemSOFERuBULFKYh3E0gqaBh0F1F7bpg_LUZj5kw/s1600/collectionratingENGLISH.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgVgtGy-urTOH2ciitP9NQ51K-HaeMpHetLK3LrmgBeEsBep4vMrRrAeA3J8Zxl1n7Ed8LAOJVJxJx57ob43WT1zHLE6QPgCkuJL6aTWemSOFERuBULFKYh3E0gqaBh0F1F7bpg_LUZj5kw/s1600/collectionratingENGLISH.jpg" height="640" width="435" /></a></div>
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The "multiple personality" factor of borrowers shall bring countless headaches to the clerks, officers and Bank managers whenever a car has been repossessed especially on the cost of repossession. Most of the time, there will be some form of drama involved and the genre of such drama may be a "tear jerker", "thriller and suspense", "Law and Order" and "Bollywood style action" but definitely no "love story" or "science fiction" here. The repossession cost will normally be hotly debated with the Hirer and Reposession Agents both giving their "submissions" to the "Judge" i.e the Bank who will make the final decision.<br />
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If only all Hirers are of the "Spongebob Squarepants" character, life would be much easier as there would not be any need for repossession at all. But then, this is the real world and not "Bikini Bottom" and life is not as simple as that.<br />
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The main objective for any repossession agent is to maximize the fees for each car they repossess as they normally operate in groups of two, three or four. For "easy" cases like two or three month overdue, within the vicinity of the Bank and an "ok" Hirer, the fees are quite standardized as determined by the Bank. Unlike some "heavy metal" stuff which normally surpassed the more than 6 (six) months overdue threshold and sometimes overdue for years coupled with the "current owner" being a "difficult" chap to deal with, then the fees are definitely higher. In some cases, the Bank has to resort to a "buy back" arrangement if it is still worth doing so (Hmm.. car repossession also got a "buy back" arrangement :)) and the amount could well reach thousands of Ringgit. The original Hirer will definitely suffer from the resulting legal action as most of the time the car has been passed around multiple times from hand to hand originating from an innocent "Continue Payment" deal gone sour. (more on that later)<br />
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<span style="line-height: 23.7999992370605px;">Back to Reposession Agent. Maximizing their fees and getting "high success rate" Repossession Authority are their main objective. That is why they need to have a good rapport with the clerk or officer or Bank Manager who gives out the Repossession Authority. The one who gives out the </span><span style="line-height: 23.7999992370605px;">Repossession Authority need to be extra careful in distributing them as giving the same </span><span style="line-height: 23.7999992370605px;">Repossession Authority to multiple Agents especially the "easy ones" would be inviting trouble unless it is agreed upon themselves (for highly wanted cases) and done in an "open" manner and in the spirit of "may the best agent win"' atmosphere. There were cases of Agents fighting among themselves ala "gang war" over a </span><span style="line-height: 23.7999992370605px;">Repossession Authority and some Bank staffs have been known to be assaulted over some </span><span style="line-height: 23.7999992370605px;">Repossession Authority issues. Hmm... perhaps the Bank would look into giving more insurance cover and benefits for their collection staffs judging from the risk they face everyday. In the "old days" the counter clerks face more risks in terms of robbery. Nowadays robbers has gone "online" (they even managed to steal more money "at their fingertips") or prefer to steal ATM machines and some fools has also resorted to stealing Cheque Deposit Machines for whatever reason known to them. Now the collection staffs' job is far more riskier. :)</span><br />
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Ok. Enough of that. Below is a sample of a <span style="line-height: 23.7999992370605px;">Repossession Authority:</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPqW9eqT7mzLNR_Xw8qIDyieirbKDhtOGetudI7NbvuT6qyFJgU6VrZnbjGfqVXxoM2NyI3uHvWttowB1qPAtuqZ2xF9f_kX9yohXJK2b5IqgtmQn8Mf3_YaNzpgh5aL1XbsJmp0u2WK10/s1600/RA.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPqW9eqT7mzLNR_Xw8qIDyieirbKDhtOGetudI7NbvuT6qyFJgU6VrZnbjGfqVXxoM2NyI3uHvWttowB1qPAtuqZ2xF9f_kX9yohXJK2b5IqgtmQn8Mf3_YaNzpgh5aL1XbsJmp0u2WK10/s1600/RA.jpg" height="400" width="332" /></a></div>
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<span style="background-color: white; line-height: 23.7999992370605px;">We shall continue in the next section where we will discuss the events after repossession. Quite a long story....</span></div>
Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-74714476437673629972014-10-27T22:48:00.000+08:002014-10-28T00:44:30.273+08:00Legal Action Procedures - Hire Purchase Loan (Motor Vehicle) - Part 1<div style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.7999992370605px;">
Now we have reached a quite "popular" topic that is the legal procedures for car loan recovery. Why? Because most people have cars either brand new or used and most are bought through Bank loans. Out of necessity of course! A "new" car today will be classified as "used" immediately upon registration. Those with loan terms of 7 and 9 years are still paying throu<span style="line-height: 23.7999992370605px;">gh their noses or already starting new loans through refinancing (if the car still got some value) or buying a new car when the old loan has been settled in full. </span><br />
<span style="line-height: 23.7999992370605px;">Before we proceed with the car loan recovery procedures, there are a few things that you need to know.</span><span style="line-height: 23.7999992370605px;"></span></div>
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<span style="line-height: 23.7999992370605px;">All car pu</span><span style="line-height: 23.7999992370605px;">rchases made through Bank loans are governed by the provisions of the Hire Purchase Act 1967 (latest amendments 2010) which is under the purview of the Ministry of Domestic Trade, Co-operatives and Consumerism (MDTCC). The Act has undergone numerous amendments and adjustments to protect the rights of consumers or to be exact, the "Hirer" as well as the "Owner" that is the Bank giving the loan. There are at least </span><span style="line-height: 23.7999992370605px;">32 offences cited in this Act which covers the Owner giving blank Second Schedule (Part 1 and 2) and the Hire Purchase Agreement to be signed by the Hirer, the agent or Owner not collecting the minimum deposit of 10%, fraudulent sale of the car by Hirer (usually through "Continue Payment" arrangement), failure in the part of the Owner to give the statutory Notices (Fourth and Fifth Schedule), non disclosure of facts and a host of other wrongdoings. Based on the examples given, you can judge for yourself that the Act has been abused with impunity all this while. </span></div>
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<span style="line-height: 23.7999992370605px;">The various penalties for anybody who is found guilty of committing offences under this Act are listed below: </span></div>
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.7999992370605px;"><b><u>FALSE STATEMENT BY DEALERS, etc., IN PROPOSALS</u></b></span></span><br />
<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;"><br /></span></span><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;"><i><b>Section 36. Where—</b></i></span></span><br />
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<i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(a) a dealer, an agent or a person on behalf of an owner </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">prepares or causes to be prepared a hire-purchase </span></b></i><i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">agreement or offer in writing that, if accepted, will </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">constitute a hire-purchase agreement with the intention </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">of bringing about a contractual relationship between an </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">owner and a hirer; and </span></b></i><br />
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<i><b><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">(b) the agreement or offer contains to the knowledge of the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">dealer, agent or person acting on behalf of the owner, as </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">the case may be, a false statement or representation that </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">is false in any material particular, </span></b></i><i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">the dealer, agent or person acting on behalf of the owner shall be </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">guilty of an offence under this Act and shall, on conviction, be liable </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">to a fine not exceeding ten thousand ringgit or to imprisonment for a </span></b></i><i style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;"><b>term not exceeding twelve months or to both.</b></i><br />
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.7999992370605px;"><b><u>FRAUDULENT SALE OR DISPOSAL OF GOODS BY HIRER</u></b></span></span><br />
<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;"><br /></span></span><i style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;"><b>Section </b></i><i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">38. Every person who, by the disposal or sale of any goods </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">comprised in a hire-purchase agreement, or by the removal of the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">goods, or by any other means, defrauds or attempts to defraud the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">owner shall be guilty of an offence under this Act and shall, on </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">conviction, be liable to a fine not exceeding thirty thousand ringgit or </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">to imprisonment for a term not exceeding three years or to both.</span></b></i><br />
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.7999992370605px;"><b><u>PENALTY NOT EXPRESSLY PROVIDED FOR</u></b></span></span><br />
<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;"><br /></span></span><i style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;"><b>Section </b></i><b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">46. (1) Any person who is guilty of an offence under this Act or </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">any regulations made thereunder for which no penalty is expressly </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">provided shall, on conviction, be liable—</span></i></b><br />
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<b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(a) if such person is a body corporate, to a fine not </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">exceeding one hundred thousand ringgit, and for a </span></i></b><b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">second or subsequent offence, to a fine not exceeding </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">two hundred and fifty thousand ringgit;</span></i></b><br />
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<b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(b) if such person is not a body corporate, to a fine not </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">exceeding twenty-five thousand ringgit or to </span></i></b><b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">imprisonment for a term not exceeding three years or to </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">both, and for a second or subsequent offence, to a fine </span><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">not exceeding fifty thousand ringgit or to imprisonment </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">for a term not exceeding five years or to both.</span></i></b><br />
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<b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(2) Where a person, being a director, manager or an officer </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">concerned in the management of the body corporate or was </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">purporting to act in such capacity, is guilty, by virtue of section 47, of </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">an offence under this Act or any regulations made thereunder for </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">which no penalty is expressly provided, he shall be liable to the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">penalty provided for under paragraph (1)(b).</span></i></b><br />
<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;"><b><i><br /></i></b></span></span><i style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;"><b>Section </b></i><b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">47. Where any offence under this Act has been committed by </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">anybody corporate (whether or not the body corporate has been </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">prosecuted) any person who at the time of the commission of the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">offence was a director, manager or an officer concerned in the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">management of the body corporate or was purporting to act in such </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">capacity shall be deemed to be guilty of that offence unless he proves </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">that the offence was committed without his consent or connivance </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">and that he exercised all such diligence to prevent the commission of </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">the offence as he ought to have exercised having regard to the nature </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">of his functions in that capacity and to all the circumstances of the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">case.</span></i></b><br />
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.7999992370605px;"><b><u>PRINCIPAL CRIMINALLY LIABLE FOR ACTS OF SERVANT OR AGENT</u></b></span></span><br />
<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;"><b><i><br /></i></b></span></span><i style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;"><b>Section </b></i><b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">48. Where the agent or servant of a person commits an offence, or </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">does anything or omits to do anything (which if done or omitted to be </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">done by that person would constitute an offence under this Act) that </span></i></b><b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">person shall notwithstanding that he has no knowledge of the offence </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">be deemed guilty of the offence and be liable to punishment for the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">offence unless he proves that—</span></i></b><br />
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<b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(a) the act or omission complained of was not within the </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">ordinary scope of the employment of the agent or </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">servant; or</span></i></b><br />
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<b><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(b) the act or omission complained of was done or omitted </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">to be done without his consent or connivance and that he </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">exercised all such diligence to prevent the commission </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">as he ought to have exercised having regard to all the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">circumstances of the case.</span></i></b><br />
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.7999992370605px;"><b><u>OBSTRUCTION OF OFFICERS</u></b></span></span><br />
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<i style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;"><b>Section </b></i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;"><i><b>51. (1) Any person who—</b></i></span></span><br />
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<i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(</span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">a) wilfully obstructs any officer appointed under this Act </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">acting in pursuance of this Act;</span></b></i><br />
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<i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(b) wilfully fails to comply with any requirement properly </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">made to him by such an officer under section 50; or</span></b></i><br />
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<i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(c) without reasonable cause fails to give such an officer so </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">acting any other assistance or information which he may </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">reasonably require of him for the purpose of the </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">performance of his functions under this Act, </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">shall be guilty of an offence and shall, on conviction, be liable to a </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">fine not exceeding thirty thousand ringgit or to imprisonment for a </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">term not exceeding three years or to both.</span></b></i><br />
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<i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">(2) If any person, in giving any such information as is mentioned </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">in the preceding subsection, makes any statement which he knows or </span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">has reason to believe to be false, he shall be guilty of an offence and </span></b></i><i><b><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="font-size: 14px; line-height: 23.7999992370605px;">shall, on conviction, be liable to the penalty mentioned in that </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.7999992370605px;">subsection</span></b></i><br />
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As you can see, the penalties and fines are quite hefty. Like I said before, the main purpose of the Hire Purchase Act is to protect the Owner/Bank as well as the Hirers especially the ones who buy used cars in terms of protection against cars that do not meet specifications or cars with hidden defects, "chopped" or "frankenstein" cars and stolen cars. The Act also protects against improper procedures on loan processing, repossession and legal action. In 2010, some amendments even though excellent in its intention in added protection, is deemed to be too protective and in certain cases is impractical in its implementation, according to some quarters. As a result, the new provisions caused problems to consumers, the Banks and the car dealers to a point that car buying and loan processing has become so slow and frustrating.</div>
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For the consumers, it caused problems especially to those who want the car "yesterday" especially during festive season (very very important to some people) but at the same time, they also want full protection from the Act when they got into trouble even though they (the Hirer) are also guilty of breaking the rules in one way or the other whether they realized it or not. I do not want to comment too much on this as the affected parties has already discussed this matter at length with the authorities and their grouses are easily searchable with the ever accommodating Mr Google.<br />
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I want to "talk" about the loan recovery process for car loan in accordance with the provisions of the Hire Purchase Act 1967 (latest amendment 2010) and some other related issues such as "Continue Payment", failure to state the current location of the car and the like. As I have mentioned earlier, in a Hire Purchase Agreement, as long as the loan remain unpaid, the borrower is called the "Hirer" and the Bank is the real "Owner" of the car where the ownership claim is prominently displayed in the registration card.</div>
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Normally the interest/usury rate for a Hire Purchase agreement is of the "flat rate" type even though the "variable rate" type based on the Base Lending Rate (BLR) is also available as another option where a certain percentage point will be added to the BLR. The interest/usury rate structure is provided for under what is known as the "Sixth Schedule" as shown below:</div>
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<span style="background-color: white; line-height: 23.7999992370605px;">The above calculation is closely related to the "rebate" or a discount that is given for the balance of total interest not yet due when the Hirer wants to make an early settlement for the loan. We shall take an example from the loan details below:</span></div>
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<span style="line-height: 23.7999992370605px;">Assuming that the Hirer wants to settle the loan by the 36th month, the formula for rebate calculation is:</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg4RDpBBZIfF_eBbrEFQFAqkIRx6vwV211BLYbWzJa5_lXfISL3hdgnTl-gNfDTBNi0ccFMQgxDdzApkdqSwFPfDsY58uoUsjwAuXZc8FNlXq9_jHbw9AgbJDJNexlIwum2Abh-tOkrHaz0/s1600/rebatecalcenglish.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg4RDpBBZIfF_eBbrEFQFAqkIRx6vwV211BLYbWzJa5_lXfISL3hdgnTl-gNfDTBNi0ccFMQgxDdzApkdqSwFPfDsY58uoUsjwAuXZc8FNlXq9_jHbw9AgbJDJNexlIwum2Abh-tOkrHaz0/s1600/rebatecalcenglish.jpg" height="165" width="400" /></a></div>
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Based on the above calculation, the rebate or discount given is <span style="line-height: 23.7999992370605px;">RM8036.70 and this amount is valid until the next due date. If the cutoff date has expired, the rebate for the next due date will be calculated for the following month which is for payment number 37 and so on.</span></div>
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During my younger days, the rebate is calculated manually and you can show it to the Hirer if he/she is not satisfied by just looking at the precalculated figure in the ledger. This is the main bone of contention between the Hirer and the Bank whenever there is a full settlement request. The usual dialogue is " I have paid a lot of money already, why is the balance so high? I'm a math teacher you know and I have done my own calculations! (based on a true story) The answer is "This is the math of usury. The name of this calculation is the"Rule of 78" or the "Sum of the Digits" (that is the sum of 1+2+3+4+5+6+...+12 = 78) that is a formula created in the 1920s before the existence of the calculator. The main purpose is to enable the creditors to maximize their profit where a large portion of interest/usury will be collected during the early stages of the loan. So the Bank will whack the interest/usury during the early years (approximately 75% of interest/usury up to the halfway mark of the loan) . Only towards the end a larger portion of the principal will be collected. That is why dear math teacher, you will not find the answer in your "normal" textbook." </div>
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Not too many people know about this as most of the computations are done with the computer. To have a bit of understanding, you can refer to the table shown below:</div>
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<span style="line-height: 23.7999992370605px;">A Hire Purchase Agreement commences as soon as the Bank pays the car dealer or the previous owner of the car for the price of the car which includes the first year of insurance premium for a new car. If, for whatever reason the Hirer decides that he/she wants to return or sell the car and would like to make full settlement, even after a few hours, he/she will be charged interest/usury of RM330.28 and the "new" car he/she has bought, has already become a "second hand" car and shall lose a few thousand Ringgit more. That is the fact that has to be accepted.</span></div>
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You can also see for yourself, even up to the third year, a large portion is still "reserved" for interest/usury. That is the interest structure that has been molded into the Hire Purchase Act which is the "Rule of 78" as what I have mentioned previously. However, it is not clearly stated in the Act as you can see here:</div>
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In your opinion, how many people can actually understand the "calculation method" given above? Yes, not many. There used to be a detailed formula but not anymore. Perhaps it is deemed unnecessary in the age of advanced technology we live in where everything is "at your fingertips". No more manual calculation in the "good old days" which is actually good in terms of understanding what the heck you are doing. You can bet your life's possession that not many "new age" Bankers actually know how to calculate the rebate manually. There are some Hirers who will insist on seeing and understanding how the formula works and I would love to see the look on their faces if confronted with such situation. Some will just say that if the computer prints it, it must be right and if the Hirer still insists, they will have to look for the "old timers" or the "old school" colleagues, that is if they still exist. Some have gone their own way after the massive "golden handshake" exercise during the financial crisis of 1997.</div>
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Whatever the case may be, that is the fact of the matter whether it is Hire Purchase Loan, Housing Loan, Personal loan, Credit Card Loan or whatever loan the Bank may call it, the interest/usury must be "cleared" first so that it will be easier to sue the borrowers (in the event of default) on the maximum amount of principal and maximize the late or penalty charges and upon obtaining Judgment, charge further interest on the maximized amount.</div>
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That shall be the introduction for the "interest-ing" topic on the Hire Purchase Act 1967 (latest amendment 2010). We can now proceed to the Loan Recovery Procedures for Hire Purchase Loan with special focus on motor vehicle in Part 2 of the series...</div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-78461432901597199862014-08-30T15:00:00.000+08:002014-08-30T15:01:57.526+08:00Legal Action Procedures: Personal Loan Part 3<div style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;">
<strong>EXECUTION OF JUDGMENT</strong><br />
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In the last post we have learned about the process of obtaining Judgment from the Court. So we will show the previous info graphic to refresh your memory.<br />
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As you can see, there are a few options available for the Bank to "persuade" or "force" the borrower to pay through the execution of Judgment together with the estimated time frame for each action. We will examine each method one by one.<br />
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<strong>BANKRUPTCY </strong></div>
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If the Judgment sum together with the accumulated late charges (after Judgment) and cost added together comes up to at least RM30,000, the decision is straightforward that is the execution of Judgment by way of Bankruptcy action. This is the most feared action for most borrowers because their "freedom" will be taken away and "frozen" as detailed below:<br />
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1) All his/her financial matters will be administered by the Official Assignee (OA) appointed by the Jabatan Insolvensi Malaysia (Malaysian Insolvency Department)<br />
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2) His/her Bank account will be frozen until given the consent by the OA to be activated.<br />
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3) The Bankrupt would have to submit or reveal a detailed list of his/her assets and liabilities including monthly expenses. The OA will then decide (after discussion of course) how much from the monthly income to be deducted to service the outstanding loan.<br />
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4) A Bankrupt cannot hold any position (directorship, partnership, sole proprietorship) in a company meaning he or she will not be able to do any registered business<br />
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5) A Bankrupt cannot travel outside Malaysia without the written consent from the Director General of the Insolvency Department. For those who wants to perform the Haj, it is however allowed only once. A bankrupt is required to surrender his/her international passport to the Insolvency Department.<br />
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6) The OA will also conduct a check on the Bankrupt's loan status with other Banks and will include ALL of them in their records. That simply means that when other Banks find out about the Bankrupt's status, they will file a document called "Proof of Debt" where all liabilities of the Bankrupt will be grouped together and unless until all of the outstanding sum is settled, a discharge will not be given. Anybody can file this document. Imagine if during the younger days the Bankrupt used to bully the old ice cream man or the local "roti" seller by taking ice cream and bread without paying, they too can file the "Proof of Debt" if they are still alive and pissed enough to do so. That is an extreme example but it can happen. You never know...<br />
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Those are some of the "privileges" of being a Bankrupt but he/she may still work as usual but need to keep on paying the monthly commitment with the OA. We should be thankful that we have our independence. Some people told me that during the British rule, a Bankrupt is only allowed to wear a "singlet", short pants and slippers to reflect his "status" in the society. We have no idea if there is a female version of a Bankrupt during that time. Correct me if I'm wrong. This is only based on hearsay.<br />
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With a lot of "pain" and inconveniences of being a Bankrupt, this is the "best" and most potent weapon of the Banks (that is if the person is "worth" something to pay the debt). What if the outstanding amount is less than RM30,000 or almost RM30,000 with "so near yet so far" situation? If it is almost RM30,000, the Bank can wait for a little while until the interest gained reach the "magic" number. We shall discuss in length the Bankruptcy procedures in another posting (otherwise this post will be much longer and some of you are complaining about long articles. Too lazy to read they say...). In short, it will take approximately 6 (SIX) to 8 (EIGHT) months to "successfully" make a person a Bankrupt if everything goes "well".<br />
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<strong>WRIT OF SEIZURE AND SALE </strong><br />
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A problem will arise when the Judgment sum is too far from the magical figure of RM30,000 and if the Bank wants to wait for the interest to be enough to cover for it, it will take too long and the senior officers would have been retired by then. Therefore another alternative would have to be taken to "persuade" the borrower to make payment. We can see from the graphic below regarding a Judgment sum of RM14,000, with an interest rate of 6% and the time taken to reach the figure of more than RM30,000:</div>
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You can see for yourself that even at a compounded rate of interest, it would take a bit more than 13 (THIRTEEN) years or we can take a "ballpark figure" of 14 (FOURTEEN) years to reach RM30,000 while knowing the limit for Judgment execution is only 12 (TWELVE) years. So the next course of action would probably be the execution of Judgment by way of "<strong>Writ of Seizure and Sale</strong>" that is loosely translated as an Order from the Court to seize the belongings in the borrower's place of residence or house and auctioning it to recover the outstanding sum. It is part of the "<strong>Writ of Execution</strong>" (If you want a detailed explanation, please ask your local Mr Lawyer. It is not the scope of this post and this is not a course in Law. In the context of this post, this is deemed sufficient to give a bit of general explanation)</div>
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In this case, the Bank can make an application to the Court for an Order to seize the property or belongings that is believed to be the borrower's and contained inside the borrower's house. The belongings shall not include the clothes the borrower wears at that point of time (Hard luck if you are clad in a towel after a shower), wife and kids and whatever that is deemed reasonable for the borrower's use including undergarments, handphone (so you won't miss your Facebook updates), cooking utensils and the "tools of the trade" that is the equipment that may be essential for the borrower to earn a living up to the value of RM200. I do not know whether this amount has been amended to "keep up with the times" but I won't waste my time checking because normally this is not followed strictly based on compassionate grounds since the main purpose is not so much on the auctioning off the belongings (not much can be gained anyway unless the belongings are indeed valuable) but to embarrass the borrower to make payment.<br />
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When the Order is obtained, the Bank officer, accompanied by the Court Bailiff will visit the borrower's house and will list all the belongings inside the house that is deemed valuable and give an estimation of their values (normally about 50% of actual value) and get a total sum. The borrower then will be given 14 (FOURTEEN) days to settle the Judgment sum or negotiate a payment proposal failing which the goods and belongings will be sold at a public auction. A security guard will be stationed at the house to make sure that no belongings are taken out of the house during the period and the borrower will also be required to pay for the guard's personalized security "services"</div>
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When doing this sort of action, always keep in mind that some items which may look "valuable" like the brand new 90 inch 3D LED TV and the state of the art Home Theatre System may not really "belongs" to the borrower. They may still belong to a creditor for example Courts Mammoth or Seng Heng and <strong>CANNOT</strong> be seized unless you can sell them more than their outstanding amount which is impossible. If those items were recently purchased during the Raya or Eid celebrations with the "pay three months later" promotion, then not even a single cent or "sen" has been paid. Another factor that needs to be considered is that the borrower may claim that the household items does not belong to him/her but his/her spouse, mother, father, grandfather, family friend or the cat or whatever entity he/she can think of. The Bank officer would have to be very cautious in assessing the situation.<br />
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In this kind of situation, there are bound to be commotions and tensions due to the "embarrassment" factor especially with the neighbours (the nosy ones, of course with their own local gossip Facebook Page and a smartphone in hand) not to mention the "price" given for the household items. However, as mentioned earlier, usually not much items that is of value can actually be gathered and recorded. The Bank may eventually has only a few useless and worn out items in the inventory and obviously it may not worth the effort. To get the Order is one thing as it may take a long time especially in major towns like Kuala Lumpur as well as the "difficulty" in "booking" the services of the Court Bailiff is another as there are not many of them around. The Bank can only hope that the borrower is embarrassed enough to find a way to make payment otherwise the Bank would have to proceed with the auction of "worthless" junks. This is where the role of the Bank's "CSI" team is very important in making preliminary assessment. </div>
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This action (Writ of Seizure and Sale) is "best" used on a company's premises and a company that is still doing business. At least the items in the premises is more or less "confirmed" to be belonging to the company concerned and at the very least, the Bank can seal the entrance for 14 (FOURTEEN) days. If the company has a good reputation and is still doing business, it will definitely negotiate a payment settlement. A case in point happens to, ironically to a well known Bank where the Bank has been sued by one of its customers. The customer is a partner in a company which has substantial amount of money in an account with the Bank. His other partner passed away and the Bank refused to release the money to the other partner hence the suit was filed. The partner won and proceeded with the Writ of Seizure and Sale and the Bank's premises was sealed with the staffs and some customers still inside. Needless to say, the Bank settled the matter immediately. For an individual, based on the factors aforementioned , it is quite difficult with the risk of not getting anything except for incurring more costs.</div>
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<strong>GARNISHEE ORDER </strong><br />
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This is an "ambush" method where an Order will be served to anybody (usually a Bank) or a person who has money due to be paid to the borrower. In case of a Bank, the Order will be served when it is perceived that the money is already credited to the borrower's account. In case of a company or individual, if it is determined that there is payment is to be made to the borrower, the Order can be served to the company or individual BEFORE it has been paid to the borrower. Therefore, in either case, whatever amount available will have to be surrendered to the Bank initiating the action and if there is an excess, it will be refunded to the borrower. This method is risky because if the timing is not right or the amount is not "right", it may be just be an exercise of futility. On top of that, there are certain restrictions as to what can be garnished using this method as detailed below:<br />
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1) You cannot use this method against the Government<br />
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2) Monthly salary due to the borrower <strong>CANNOT</strong> be garnished as it will contradict <em><b>Section 31 </b>of the <b>Employment Act 1955</b></em> which gives protection to employees in terms of their salaries.<br />
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3) Borrower is deceased<br />
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.799999237060547px;">4) Under </span></span><em style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;"><strong>Section 11, Workmen's Compensation Act 195</strong></em><strong style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;">2</strong><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;">, any compensation due to the borrower cannot be garnished. ("</span><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.799999237060547px;">Save as provided by this Act, no lump sum or half-monthly </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;">payment payable under this Act shall in any way be capable of </span><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;">being assigned or charged or be liable to attachment or pass to any </span><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;">person other than the workman by operation of law nor shall any </span></i><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;"><i>claim be set off against the same</i>.")</span><br />
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<span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.799999237060547px;">5) Under </span></span><em style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;"><strong>Section 41 (2)</strong> <strong></strong></em><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.799999237060547px;"><b><i>Employees’ Social </i></b></span></span><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.799999237060547px;"><b><i>Security Act 1969</i></b></span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;"><strong style="font-style: italic;"> </strong>which<strong style="font-style: italic;"> </strong>states that<strong style="font-style: italic;"> "</strong></span><i><span style="font-family: Georgia, Bitstream Charter, serif;"><span style="line-height: 23.799999237060547px;">no cash benefit including invalidity grant or contributions </span></span><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;">payable under this Act shall be liable to attachment or sale in </span></i><span style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;"><i>execution of any decree or order of any court.</i>"</span></div>
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As you can see for yourself, this method of execution may "fall flat in your face" due to the wrong timing of serving as the Bank cannot "force" the Court to come up with the Order to their liking and the time taken may well be after the money to be garnished has changed hands and spent by the borrower. The strategy must be well planned and highly accurate and again, the "CSI" department must have "top notch" information otherwise it will be a total waste of time and more cost incurred.</div>
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<strong>JUDGMENT DEBTOR SUMMONS (JDS)</strong><br />
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This type of action is seldom used as it involves the possibility of putting the borrower in jail. What a "good" prospect as some might say especially for those borrowers who are a "pain in the ass" to deal with but it is not that simple. What the Bank wants is a "win win" situation and a "lose lose" or "in your face" situation for the borrower. That means for the clerk or officer handling the "pain in the ass" case, wouldn't it be good if they can get the payment and the borrower goes to jail? (As in the monopoly game, "Go directly to Jail, Do Not Pass GO, Do Not Collect $200)<br />
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Unfortunately, you cannot have the cake and eat it at the same time. The Court may send the borrower to jail but the Bank won't get the money because that is the reason the borrower went to jail in the first place! On top of that, all the "expenses" that is the "meal allowances" (at least three times a day) for the borrower will have to be paid by the Bank.</div>
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The Bank would have to think carefully before invoking this action because its reputation is at stake. While on the positive side it may be good to be seen as a "no nonsense" Bank, it could also bring negative side effects. The Bank may be perceived as a "cruel beast" imprisoning non paying borrowers (while it is okay for the same "cruel beast" creating money out of thin air and charging interest on top of that due to the capitalistic economic system of dependency) especially during these times of the "boycott" phenomenon. They would not risk the fate of a well known Bank recently being condemned for closing the account of a few Islamic charitable organizations that contribute to the cause of the Palestinians. Some has called for concerted withdrawal of their facilities with the Bank or a mini "Bank Run". What is odd however, is that this Bank's "Islamic" or "Syariah Compliance" department which has been certified "Halal" previously has been declared "Haram" or "Not Permissible in Islam" even though its so called Islamic "modus operandi" is EXACTLY the same with the other Banks... Hmm... So the Banks normally would have to be careful with its actions in order to avoid a similar fate or risk a boycott or even a total Bank run with the powerful social media at its mercy.<br />
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Ok. Sorry to digress a bit from the topic of Judgment Debtor Summons (JDS). We now go to the process of this particular action. It goes like this:</div>
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1) The borrower will be "summoned" to appear in Court to give a detailed information (with documentary evidence) of his/her monthly income and expenses and will be assessed on his/her capacity to pay the outstanding loan amount.<br />
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2) When the Court or rather the Judge is satisfied that the borrower has the capacity to pay a certain amount towards the outstanding sum, a "Consent Order" will be issued to the borrower if he/she consented to the arrangement. However, an "Order of the Court" can also be issued when there is no consent recorded requiring the borrower to settle the Judgment sum in full or by monthly instalments.<br />
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3) If the borrower fails to appear in Court after the service of JDS, a Warrant or Order of Arrest will be issued against him/her.<br />
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4) In the event the borrower fails to adhere to the Order of the Court or Consent Order, a notice called a "Judgment Notice" will be issued against him/her requiring the borrower to explain the reason why he/she fails to comply with the Order of the Court and convince the Court why he/she should not be sent to jail for non compliance.<br />
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There you go. It sounds and looks "brutal" enough. But one has to remember one thing. The Magistrate or the Judge is, well, a normal human being after all and has feelings. There are some who will strictly "go by the book" but most of the time will sympathise with the borrower. Some will see it as "a big bully of a Bank" trying to squeeze the last drop of money from a "teeny weeny" borrower. Those borrowers who are well advised or with some sense of creativity will come with more documentary evidence of expenses than income especially those doing their own business coupled with a heart wrenching story akin to a "Bollywood" movie. The borrower may come with ragged clothes, unkempt hair, an unshaven look and to add some "flavour", may also do away with armpit deodorant to amplify the "hardship and suffering" effect. Coming with a wheelchair might have another "wow" effect. The Bank officer and Mr Lawyer may even cry and sob uncontrollably.<br />
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However, it is also advisable not to overdo it. The "Stinking Armpit Move" and other moves may backfire and turn out to be an "anti climax" if the Magistrate or the Judge could not stand the stench and may end the session abruptly thus depriving the borrower to deliver his/her "heart wrenching" story. Whatever the results may be, normally this mode of execution is less effective and even if there is payment decided by the Court, it may be too little from the perspective of the Bank. A potential waste of time and probably some wasted tears.<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;"> </span><br />
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">So Ladies and Gentlemen, those are ("briefly") the procedures involved in the execution of Judgment against borrowers. With regards to Bankruptcy Proceedings, we shall discuss it in a specific post since this is the most common action taken by the Banks and it involves very specific rules and procedures. </span><br />
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">The next question would be, if the borrower has money, how do they make payment after Judgment has been obtained? Keep on reading.....</span><br />
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<strong>MAKING PAYMENT AFTER JUDGMENT</strong><br />
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When talking about making payment after Judgment, there are a few things you need to know. There are some of you who only wants to pay only RM50.oo a month so that the Bank receives only a small amount. A sort of "in your face" kind of payment which is actually not a very smart move which we will see in a short while. Lets say the details of the Judgment obtained are as follows:<br />
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Judgment Date : 15 Jun 2014</div>
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Judgment Sum : RM14,000.00</div>
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Interest Rate : 6% a year until full settlement</div>
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Other Cost : RM600</div>
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Therefore if the borrower intends to pay RM50.00 (most probably under the Order of the Court, as the Bank would not accept this kind of proposal) as a "serve them right" or "in your face" kind of payment, we shall see what will happen and how the payment is treated and its calculation.<br />
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As you can see from the above example, the payment of RM50.00 is not even enough to cover the calculated monthly interest so the Judgment balance will increase and the interest will be calculated on the "new" Judgment balance. Please also note that the cost will remain the same until a substantial amount is paid to cover the whole sum. Some Banks will deduct the cost first so in this case, it will take 6 (SIX) months to cover for the cost and the Judgment interest will be calculated for six months and definitely the RM50.00 will not be able to cover the interest as well. Therefore the Judgment sum will never be settled and the interest will perpetually increase. So much for the "in your face" payment where it will instead fall flat on the face of the borrower.<br />
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For the Bank, it would not be too much trouble nowadays to treat such small payment unlike the "good old days" where things were done manually. Even so, it is not difficult to do as it only involves taking out a "dummy ledger" and recording the payment and interest and issuing a receipt. Therefore if the borrower is serious in settling the Judgment sum, he/she should negotiate a discount on the interest charged as the cost is usually non negotiable since the Bank has already paid for it. The Bank usually will ask for an upfront payment which would be able to cover at least 30% to 50% of the Judgment sum so the subsequent interest can be reduced. The proposed monthly instalment after the lump sum payment should be able to cover for the monthly interest and reduce the Judgment sum as well. If you want to win against the Bank you may win some of the time but the Bank will "win" most of the time. Every time you take a loan, your name will be forever recorded in the Banks' computer system and some other third party information system as well as in the Central Bank's system. When you are being sued by the Bank, it will also be recorded in CTOS (Credit Tip Off Service - A Private company) for the Banks' future reference.<br />
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However, there exist some "backdoor" loans (besides loan shark "facilities") that can be obtained by "blacklisted" and Bankrupt borrowers as evident by the various advertisements for personal and car loans with the tagline "Blacklisted and Bankrupts" can also apply. How do they do it? We shall discuss it in further detail in yet another post.<br />
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In conclusion, Ladies and Gentlemen, after going through the procedures of the execution of Judgment, you should understand by now that the best avenue for the Bank or rather the "easiest" course of action would be by way of Bankruptcy proceedings as it is the least "troublesome" and the one with the highest impact although it requires an outstanding sum of at least RM30,000. However, judging from the price of cars and houses nowadays some reaching hundreds of thousands and even millions, it should not be a "problem". The "problem" is with the amount less than the "magical" figure of RM30,000 as we have seen previously. It can be a personal loan or a shortfall or balance from the auction of a car or a house which still need to be collected.<br />
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This is where the Debt Collection Agency plays an important part as a "support group" for a more effective debt collection. This is more or less a "symbiotic" relationship between the Bank and the Collection Agency. As what I have mentioned before in previous articles, there are Banks who appointed the Debt Collection Agencies on a commission basis and there are Banks who "sold" the debt at a discounted "price" depending on each Banks' collection policy. The legality of such deal is still open for debate but since some loan agreement may have included this option, it may not be a big issue after all.<br />
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The main issue would be on the subject of selling off bad debts which has been written off and may have "expired" due to the restriction as provided in the Limitation Act and the basis of selling and collection would be on "best effort basis". A lot of people has been harassed for such debts by the Collection Agencies without knowing that the debt has expired and the Banks or the Collection Agencies have no right to collect the debt anymore. Even though "morally" the borrowers are still obligated to pay but the matter is up to the "discretion" of the borrower now as the borrower may want to pay only the principal sum and a "little bit" of "reasonable" interest. The matter can be settled amicably when the borrower has the capacity to pay to clear his/her name. If any one of you (meaning you the reader) has been harassed for a debt that is at least more than 6 (SIX) years since the last instalment paid, it is better to check with the Bank whether there is any legal action ongoing or check whether there is any Judgment obtained against you and check whether the judgment is still "alive" or more than 12 years WITHOUT any execution of Judgment. Bring a lawyer if you have to. The Collection Agencies are required to follow certain guidelines even though some claimed that their collection techniques resembles that of a loan shark.<br />
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Another point worth mentioning is that it is very important not to sever any ties with the Bank as you need to know what they are up to even though some of you would prefer to perform the "disappearing act". However, the "disappearing act" technique may haunt you later especially during a Bankruptcy proceeding where the chances to do some "time wasting maneuvers" may not be available until its too late. So stay in touch even though through a "proxy". "So near yet so far" kind of relationship.</div>
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<strong>WHAT ABOUT GUARANTORS?</strong></div>
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The last question for this post. What about the guarantor? What will happen to them? The info graphic below has the answer.<br />
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I just want to add a bit of information. If a guarantor is the spouse of the borrower, it can be said that it is "the norm" or "acceptable" since there is a "sharing of benefit" unless the spouse has no knowledge about the loan as this also happens sometimes. If there is a divorce (some are caused by the loan itself) there would seem to be a problem of determining who is "responsible" but by law both are equally liable.<br />
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As for the "social" guarantor like being a guarantor for a friend or amongst siblings, it is more complicated. If the borrower suddenly "decides" to disappear, then the guarantor would have his/her life turned upside down. There is a Malay saying which literally means "carrying a live monitor lizard" or "carrying an unnecessary burden" or something to that effect and that is exactly what it is. If among siblings, at the very least there is a chance to see them during festive season but among friends, I wish you good luck. So the next time somebody asked you to be a guarantor, think very, very carefully before signing on the dotted line. A friend of mine was asked to be a guarantor but due to his ignorance, he was instead "turned" into a borrower and now would have to bear the burden of paying the loan. So be careful before giving your identity card to anybody and I do mean anybody. People can fake savings account, Income Tax forms and other loan "documents" and all they need is an accomplice in the Bank to "manufacture" the loan. You may become a victim of a loan scam. A lot of guarantors has been declared a Bankrupt for "nothing" where they received no benefit whatsoever except for a tarnished reputation as a "bad person" in the eyes of the Banking sector.<br />
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Well, this is the end of quite a long post on the Legal Action and procedures for a Personal Loan. For housing and vehicle loan, there is a slight difference in the steps taken as both have their own sets of Laws or Acts to adhere to. The end result is the same after Judgment is obtained after the auction of the vehicle or the house where there is a shortfall (depending on some conditions). We shall discuss in detail in another post (again!). For the time being, digest this one first....</div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com3tag:blogger.com,1999:blog-4640177464320153526.post-23875358712137835982014-08-30T14:49:00.002+08:002014-08-30T15:02:38.817+08:00Legal Action Procedures: Personal Loan Part 2<div style="font-family: Georgia, 'Bitstream Charter', serif; line-height: 23.799999237060547px;">
<strong>THE FILING OF SUMMONS AND OBTAINING JUDGMENT</strong><br />
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Continued from Part 1. As what has been mentioned before, at this stage, the Bank will severe all "Diplomatic Ties" (until payment is made, that is) with the borrower demanding the whole loan balance including costs. So, before proceeding, the Bank will attempt to call the borrower or by sms for the last time asking for payment with the threat of Summons and this time it is for real unlike the same threat previously used when the account is two or three months overdue.<br />
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When there is no response from the borrower, the instruction will finally be delivered. Sometimes it is Mr Lawyer who will follow up on this matter whether to proceed further as a "note of concern" because sometimes the Bank will just keep quiet and may not inform Mr Lawyer when payment was received.<br />
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After all the necessary documentation for Summons has been prepared especially the "Statement of Claim", Mr Lawyer will instruct his/her staff to file the Summons in Court. The Summons filing process is not "free" as it involves one of two methods namely the normal physical filing or through the "e-filing" method where the documents will be scanned by the staffs of Mr Lawyer or by the court's staff for a fee. It sounds simple enough, the clerk or "despatch" will go to the Court (by motorcycle) to do the physical filing or prior scanning is done at the office. However, Mr Lawyer's bill will indicate some "professional fees" required to read the instruction, prepare the documents (copying the statement given by the Bank on a ready made "template") and finally the filing and the filing fees apart from the standard Court fees shall also include the travelling cost of filing where the cost charged is as if it was Mr Lawyer himself/herself who did the filing using his/her gas guzzling luxury car complete with the lawyer's attire and all. (just joking Mr Lawyer, don't get annoyed, that is the "norm" in the industry)</div>
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After the process of filing Summons, the Bank will have to wait (again!) for the Court to issue the copy of the Summons with a "mention date" (we will elaborate further on this term). After getting the Summons copy, it will be delivered to the last known address of the borrower and guarantor (if any) through registered post. The "mention date" used here is to give a better understanding. A few years back, the Summons will specifically have a date written as the "mention date" for the borrower to appear in Court. Nowadays with some amendment to the "Rules of the Court" it is not specifically written anymore. What is written is a certain date and the borrower will have to be present in Court after a number of days so specified. For example, it may be written this way "You are Summoned to appear in Court 14 days after this date" or something to that effect and the borrower would have to calculate the "mention date" all by himself. If there is no response or the borrower miscalculates the date, a Judgment in Default of Appearance will be granted by the Court.</div>
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During this time, a full scale "investigation" will be carried out by the Bank's "CSI" team to get more information on the borrower or guarantor (if any) especially their current whereabouts and daily activities. The "CSI" term is used loosely here because this is nothing like the "CSI" you used to see on TV (with slick moves, cool cars, nice music, cool shades, pretty ladies and advanced tools) so if you have a wild imagination about the Bank's "CSI" team, you may stop now. It may consist of the same guys/gals doing the collection or another "team" sometimes consisting of only one grumpy old bloke.<br />
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For the borrower, he/she still has the time to negotiate as the "olive branch" is still available since the time frame before the "mention date" is still available. As for the guarantor, we shall discuss in more details at the end of Part 3. For the borrowers of the type "able but do not want to pay", normally they will give in and make payment since most of them would like to take up more loan and would not want their record to be tarnished. For the "Scarface" or "Don Corleone" type of borrowers, (if you don't know who they are, you can Google Movie Wiki "The Godfather" or "Scarface") that is in the "not able /may be able but do not want to pay" category, the Summons would not have any effect whatsoever. (not yet). In order to understand fully the categories of borrowers, you can refer to this posting entitled <a href="http://debttalesthebankandyou.blogspot.com/2014/08/part-5-collection-department.html" target="_blank">PART 5 - THE COLLECTION DEPARTMENT</a> or you can see the chart that is reproduced here for easy reference:<br />
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After the period of "ceasefire" has ended that is the "last and the very last" chance to make a new promise or payment, the "mention date" finally arrived. Please refer to the info graphic below on the various possibilities that can happen on that day. No need to elaborate further on that.</div>
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We shall now go to the next month of overdue position by looking at the graphic below:</div>
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As what has been depicted, depending on the Court's decision, Judgment will be given if the case is not prolonged by any Notice of Objection or any other delaying tactics by the borrower's Lawyer. Please be reminded that the borrower's Lawyer MUST NOT be from the same Bank's panel of lawyers otherwise there will be a conflict of interest which means going against "the boss". There will be another waiting period to get the sealed and certified copy of the Judgment within one or two weeks from the mention date barring any long festive holidays.<br />
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Before we continue further, I would like to comment a bit about the allowed time limit of taking legal action. Banks or Creditors has until 6 (SIX) years from the date of default to start with the filing of Summons. That means the Bank can theoretically ignore a<br />
default of a particular account for years (which is impossible unless the Bank itself is facing Bankruptcy or in the process of being "eaten" by other Banks as in the 1997 financial crisis or the collection staffs are a bunch of buffoons and that goes to the boss as well) until the last day of the six year period to file Summons.</div>
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When Judgment is obtained, the Bank will have another 12 (TWELVE) years to execute the Judgment. Therefore theoretically, the Banks have at least 18 (EIGHTEEN) years to proceed with legal action against its borrowers. So, if there is no action taken in these two scenarios, it is then logically and fairly be concluded that by this non action the Bank has "discharged" or released its rights to collect the debt further as ample time has been given. Inability to locate the borrower is the normal excuse given for not pursuing a case such as those requiring personal service of Court Orders and Notices but avenues for "Substituted Service" in local newspapers are always available in order to avoid the "time barred" factor. We shall discuss the Limitation Act in another posting otherwise this post will take more space. We shall finish this story first.<br />
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Back to our personal loan story. After Judgment has been obtained, it is up to the Bank to choose the mode of "execution" normally after the loan has reached its seventh month overdue position as depicted in the info graphic below.<br />
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As you can see above, the mode of "execution" chosen will depend on certain conditions and timing and this is where the investigation of the "CSI" department will contribute significantly. We will go through the various modes of "execution" in the next post...<br />
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<strong>TO BE CONTINUED....</strong></div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-74546711758255611772014-08-30T14:40:00.001+08:002014-08-30T15:03:48.973+08:00Legal Action Procedures: Personal Loan Part 1<span style="background-color: white; font-family: Helvetica Neue, Arial, Helvetica, sans-serif; line-height: 23.799999237060547px;">Now we have reached the topic some of you have been waiting for. The procedures of legal action against borrowers who failed to pay their monthly instalments. We shall start with the legal action procedures for Personal Loan. Why start with Personal Loan? Because this type of loan is the "lowest" in term of ranking compared to other loans since the "strength" of this type of loan rests upon the monthly income capacity of the borrower. If there is an additional security, it would be in the form of a guarantor whose assessment is also on individual income capacity. Housing and car loan would have an added "security" in the form of the house and the car themselves apart from the financial "strength" of the borrower with a guarantor (if any). That is why personal loan is often called "unsecured loan".</span><br />
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<span style="background-color: white; line-height: 23.799999237060547px;">In cases whereby the borrower has been declared a Bankrupt and in the event all of his/her assets are auctioned off, preference will be given to those "secured" creditors with the "unsecured" creditors being the last one being considered with whatever that is left to "fight" among themselves. Usually the creditors (the Banks) with unsecured loan will end up with nothing. Credit Card loans can also be considered as "unsecured loan" with a slightly different loan structure where a certain "credit limit" is given as the maximum loan amount with only the borrower's financial capacity to depend on with no guarantor. That is why the interest structure is high to cater for the higher risks. Usually only part of the maximum limit, for example RM10,000 is used (unless the borrower went on a crazy spending spree and finish it all up in one go) and after a period of one month without payment, the remaining credit limit will be "frozen" and a very high interest rate of 16% to 18% will be charged on the balance (compounded) together with other costs thrown in. Therefore the income from the interest and from other accounts (especially the "minimum payment of 5%" gangs) can cover for the temporary "loss" of payment to a certain extent.</span></span><br />
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<span style="background-color: white; line-height: 23.799999237060547px;">The procedures of legal action for credit cards is a bit different from the normal personal loan based on the "higher" income from penalty charges and the "suitable" amount for legal action to take place. You shall be able to see later the rationale of taking legal action after seeing the procedures involved and it is slightly different. One more reason we start with personal loan is that the legal procedures are more straightforward as compared to housing and car loans where they are governed by their own set of laws namely the </span><span style="background-color: white; line-height: 23.799999237060547px;">National Land Code</span><span style="background-color: white; line-height: 23.799999237060547px;"> and </span><span style="background-color: white; line-height: 23.799999237060547px;">the </span><span style="background-color: white; line-height: 23.799999237060547px;">Hire Purchase Act 1967 respectively. The end result would be the same that is to obtain Judgment to be followed by the Execution of Judgment in order to recover the whole loan amount plus interest and costs albeit with some differences.</span></span><br />
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<span style="background-color: white; line-height: 23.799999237060547px;">Ok. We can start now. Please refer to the info graphic below. The full slide presentation can be viewed at:</span></span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><span style="background-color: white; line-height: 23.799999237060547px;"><a href="http://www.slideshare.net/AzharFahruddin/legal-action-procedure" target="_blank">Loan Recovery: The Legal Action Procedures</a> </span><span style="background-color: white; line-height: 23.799999237060547px;">or at Facebook Album Collection entitled </span><a href="https://www.facebook.com/abu.ammar.79/media_set?set=a.758374737541638.1073741834.100001073559493&type=3" style="line-height: 23.799999237060547px;" target="_blank">Info Graphic on Legal Action Procedures</a></span><br />
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<span style="background-color: white; line-height: 23.799999237060547px;">Look at the introduction screen or the "Official" Topic for the Slides:</span></span><br />
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<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; line-height: 23.799999237060547px;">If you want to know more about the "Source of Funds", that is the bicycle and Tyre pumps, you can refer to this link </span><a href="http://www.slideshare.net/AzharFahruddin/facts-of-digital-and-paper-money-and-how-interest-steal" style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; line-height: 23.799999237060547px;" target="_blank">Facts about Digital and Paper Money and Usury</a><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; line-height: 23.799999237060547px;"> . The interest structure of Personal Loans depends on the policy of the lending Banks with flat interest rate, monthly and yearly rests interest options. We shall elaborate on the differences between these interest rates in another post where we shall learn about the usage of the word "rests" in the context of interest calculation.</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Ok. We will begin with the next info graphic. In any loan application, in the beginning especially during the disbursement of the loan, it is always a "joyous" occasion where the disbursement date is usually the agreement date. If you want to find out more on the excitement and "happy hour" atmosphere during loan processing, you can go to <a href="http://debttalesthebankandyou.blogspot.com/2014/08/part-5-collection-department.html" target="_blank">Part 5 - The Collection Department</a></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">To cut a long story short, a month has passed and the first instalment has become due for payment as depicted in the picture. In this example, we will present a situation where there is no payment made whatsoever to see how long it would it to obtain Judgment through the legal process and finally the execution of the said Judgment. Yes, execution sounds a bit "brutal" but some of the methods available are close to being "brutal".</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">In a real life situation, the "zero payment received" phenomena happens occasionally but most of the time, there are several "ding dongs", that is the flow of communication between the borrower and the collection personnel, between promises kept and broken, between the branch and Head Office personnel on approval of certain actions, the borrower gone "missing", sick leave, public holidays and a host of other things as depicted in the following diagram:</span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><span style="background-color: white; line-height: 23.799999237060547px;">So, a few days without payment after the due date, the Bank obviously will start making calls and sending standard written reminders. With the advent of current technology, some will have internal text messaging capability (sms) to give "subtle" reminders to borrowers and it is very cheap compared to paper and postage costs. After making calls and sending reminders, there is nothing left to do but wait for the borrower's response preferably in terms of payment and not mere promises.</span></span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><span style="background-color: white; line-height: 23.799999237060547px;">It should be mentioned that telephone reminders evoke a variety of reactions from borrowers. The polite ones will apologize profusely and make a promise to pay "as soon as possible". There are also those who pretend to be polite just to "buy" some time. There are those who show no audible reaction whatsoever by not even picking up the phone! Some will respond by just saying "Huh! Ok. Seven Days..."</span><span style="line-height: 23.799999237060547px;"> Kinda give you an eerie feeling reminding you of the movie "The Ring" where the caller will say the same thing and in seven days you're dead. </span></span><span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif; line-height: 23.799999237060547px;">Then there are those who will scold the Bank's staff for "the lack of compassion and understanding" with dialogues such as "I will only pay at the end of the month. Who ask you to disburse the loan in the middle of the month?" Well, it was the borrower who used to call more than ten times a day asking for the disbursement. People have very short memory. Gone were the "happy" days during the loan application barely a month ago.</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Another month has passed and now the account is 2 (TWO) months overdue. Whatever promises that were made has been broken. Another round of sms, phone calls and written reminders but this time it is the "Final Reminder" being issued threatening legal action. However, the Bank will still have to wait until at least another 20 to 30 days before invoking the actual legal action as this is still considered "too early". The official "Investigation Papers" or "Collection Folder/Files" may not be opened yet as the borrower might just turn up and update the whole thing so the Bank has to be "patient" and not be too hasty. For those Bank staff who has the initiative, they will start reviewing the loan application files for "clues" or any discrepancies that might prove useful in the future because processing was done by somebody else and they might miss something. The loan will start accumulating "penalty interest" and other costs as long as the monthly payments remain unpaid.</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">How times flies and now we have entered the third month of non payment. Another round of sms and phone reminders. The collection staff will have to wait for a few more days (again!) or until after another promised date for payment has passed. After waiting for a few more days without payment, that will be the final straw That's it. No more waiting. Time to get serious. Time for reinforcement. Time to instruct the lawyers to issue "Letter/Notice of Demand" or LOD for short. The Bank hopes that by the sight of this letter, it will be enough to send the shivers down the borrowers' spines (I have a more "mature" expression but this will do :) ) and make them update the overdue payment. However, before that can happen, and depending upon the policy of the Bank, prior approval must be obtained either from the officer, the Branch Manager or the "Head Office". Another waiting game (again!)</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">This is because legal action will involve extra cost. Banks do not like to incur costs which means they will have to get "money" from other sources. They created money (remember the money creation slides?) through the loan, charge interest as "income" and if payment is not "coming back", they will have to "borrow" the cost from other paying accounts. Even though late charges will contribute as "extra fresh air" income and the interest (even though no payment has been received) has already been recognized as "income" in reality they are just imaginary numbers. "Costs" would have to be paid in cash or in digital transfer. You may say that the payment of costs are still using "imaginary numbers" but the outflow of "money" will eventually be more than the "inflow" for this particular account as we go along. (confused yet? Good)</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Ok. Enough with the confusion and on with the legal action. The first step as mentioned earlier is the "Letter/Notice of Demand" issued by the Bank's panel Lawyer (after this shall be referred to as simply "Mr Lawyer"). The cost of the letter typically ranges from RM30 to RM50 or more depending on the Lawyer Firms. Why so expensive? You may ask. Well, because of the letterhead of the Law Firm. During my working days quite some time ago, it used to be RM75 to RM100 due to the "scarcity" of law firms and most of them are well established and were educated "overseas". Some non English speaking borrowers may not understand the whole content of the letter, but seeing the Law Firm's letterhead and the Bank's name on it will definitely remind him/her that something serious is happening.</span><br />
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">But now times has changed. With the increase of local Universities offering Law degrees particularly UIA (The International Islamic Universitiy) and other private colleges offering twinning Law programs with their overseas counterpart, more Lawyers and Law Firms are available to choose from and based on the theory of supply and demand together with the competitive factor, the "price" of LODs has come down considerably even though it is still considered expensive for a piece of 80 grams paper and a few Ringgit worth of postage stamp. Whatever it is, you will have to consider the "professional value" of the letter otherwise it would be a waste of time studying Law for all those years if anybody can issue such "professional" letter. (have to give the Lawyers a bit of a breathing space, otherwise some of my lawyer friends might get offended. :) )</span><br />
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<span style="font-family: 'Helvetica Neue', Arial, Helvetica, sans-serif;">Back to the collection officer or clerk. Another waiting period to get the final approval to proceed with legal action. When approval is finally granted, an instruction letter to Mr Lawyer will be issued. For Banks with sophisticated system, an "online" instruction will be issued. The staff from the Law Firm will have to "log in" into the system to check for new instructions. There is a certain fee charged for usage of the system and Mr Lawyer would have to pay for it. Hmm... no wonder legal fees are high. Upon receiving the instruction, Mr Lawyer's staffs will prepare the LOD to be sent to the borrower and guarantor (if any). All the waiting "games" and "ding-donging" may drag on to the following month.</span><br />
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The LOD will consist of the amount overdue and a time period to pay, normally 7 (SEVEN) to 14 (FOURTEEN) days failing which the Bank will proceed with further legal action. Depending (again) on the "ding dong" factor on the lawyer's side, usually by the fourth month of overdue position, the Bank will be able to decide on the next course of action. When no payment is received after the "grace" period, the Bank will proceed with an instruction to file Summons after getting the relevant approval. The Bank must prepare a detailed breakdown of the overdue amount, late charges and costs incurred so far (postages and LOD) together with the addresses of the borrower and guarantor (if any). At this point of time, the agreement between the Bank and the Borrower will be terminated.</span></div>
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<strong><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">TO BE CONTINUED...</span></strong></div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-71311617225739575782014-08-08T16:08:00.004+08:002014-08-10T11:21:22.165+08:00PART 5 - THE COLLECTION DEPARTMENT<div style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.799999237060547px;">
When I was young, so much younger than today, I was impressed the first time I stepped into a Bank. Prior to that, the closest thing to the Bank that I have encountered was the Post Office Savings Bank with its cramped environment with various transactions such as stamps purchase, "Money Order", "Postal Order" and savings account . </div>
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When I was looking at the "Bank Tellers" at the counter with an "officer" or "manager" at the back who seemed so relaxed with nothing much to do except occasionally "signing" vouchers passed by the Bank Tellers, I said to myself "It would be great if I can work in the Bank, the job looks easy enough, not to mention "glamourous" and high self esteem". It was fated that I got a job with a financial institution with the rank of an officer (necktie and all) but with a pay half of that of a clerk. Only then that I realised that behind the "facade" lies a "whole new world" of various departments one of which is the collection department and the job is far from "easy"</div>
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So, before we go into the collection procedures, it is also good to have a look at the people behind the collection department, the"bad guys" (the "unsung heroes depending on how you look at it) of banking apart from the "acceptable sorcery and evil" practice of Banking which creates money out of nothing and charging <strong>interest/USURY</strong>. These are the people whose job is to ensure that loans and interest are collected in order to keep the "Banking engine" running.</div>
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Don't get me wrong though. I am not "demonizing" the collection gang. I have worked there before. I still have friends working in the Bank. If you know them, they are some of the nicest people around. If you happen to be their neighbour, you might only know them as working "in the bank" not knowing which department he or she is working in. They may even be the "model citizen" in their neighbourhood. The point is that they are just doing their job and it is the nature of the job that makes them look "bad" and in the negative light of things.If all debts are paid promptly, you don't even need the collection department.</div>
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You may start to question why I am suddenly seem to be defending them. Well, as with the usurious Banking system, it is "by design" and it comes as a package of oppression due to Usury/RIBA. Human beings also come with different "packages" of traits and behaviours so there will be some collection personnel with sadistic tendencies and simply loves to make other people's life miserable and some are known to make it something personal. The borrowers too are of the same mix and sometimes it is the borrowers who make life miserable for the collection staff. As I said before in the first article, I am just giving a level playing field though some of you (the Bankers of course) may cry foul on this "initiative" of mine.</div>
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In order to at least rationalise the "initiative", have you seen some videos or read articles on a crime being committed in the hope of giving information and the "modus operandi" of the crime while at the same time giving some ideas for criminals or would be criminals to learn some new tricks? Well this is something similar but the similarity ends here. There are certain laws and guidelines to follow for the protection of both the creditors and the debtors. Both creditors and debtors have their fair share of abusers of the system but in the process, the innocents and gullible get victimized though it is not entirely their fault. This is the dilemma. To tell or not to tell but I feel "telling the story" would do a lot of good than not doing so. If you look at the graphic below, a well informed borrower will no longer be easily bullied by the debt collector:</div>
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<span style="background-color: white; font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.799999237060547px; text-align: start;">In the entry level training for would be collection staff, one of the "facts" being taught are the traits and behaviours of borrowers and its relation to the potential of getting the loan payment. It is pretty straightforward as shown in the graphic below:</span></div>
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We shall briefly look into each category as detailed below:</div>
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1) <strong>ABLE AND WILLING TO PAY</strong> - A creditors' dream customer but that's what it is, a dream as not every borrower is in this category. These are the people who "live within their means" and will always ensure payment is made promptly at least until some financial calamity disrupts this behaviour.</div>
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2) <strong>ABLE BUT UNWILLING TO PAY</strong> - (Type 1) The type who typically "live beyond their means" but with some knowledge of collection procedures and "loves" being on the edge with "stuntman" mentality. They know the limit of default before legal action is taken. Most of the time they are juggling their expenses for other things other than the monthly loan commitment. Not much of a problem. Needs constant follow ups and "mild" legal action (Lawyer letter of demand) when needed.</div>
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3) <strong>ABLE BUT UNWILLING TO PAY</strong> - (Type 2) A bit similar to the type 1 above but not really familiar with legal action and procedures maybe due to the pressures of juggling expenses leading to absent mindedness or simply being absent minded. Easily pressured to make payment with "mild" or "a bit heavy" threat of legal action.</div>
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4) <strong>UNABLE BUT WILLING TO PAY</strong> - The type who lives "well beyond their means" but with all the "good intention" to pay "in good time". They believe that their economic well being will "improve" with yearly salary increment and "someday" will be able to make ends meet. They don't realise that the debt and usury/RIBA based system will cause the devaluation and loss of purchasing power of paper money. Therefore their dream of "financial freedom" will never be realised and they will keep on accumulating debt. For these type of borrowers, not really a problem with threats of legal action or initiating the legal action itself.</div>
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5) <strong>UNABLE AND UNWILLING TO PAY</strong> - (Type 1) The type that has "graduated" to living "way above their means" but somehow or rather still being given loan based on "good previous track record" (not badly tainted yet) or based on the technology of "whom you know" or through careless loan processing. Some of them are "well experienced" in legal action being taken against them. May need full fledge legal action and judgment execution to get payment.</div>
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6) <strong>UNABLE AND UNWILLING TO PAY</strong> - (Type 2) This type (not all, some are ok) normally use "non standard" (by "standard" we mean payslips, income tax form, etc) loan documents such as savings passbook, "investment" portfolios (ASB,ASN, MLM statements) and other "supporting" documents. Some are "seasonal' income earners like padi farmers. Some may use the services of "document producers" (they are good, may well be more adanced now) to get the loan or in other words, fraudulent application. At the point of loan application, it is hard to guess who they really are based on the subdued, polite, angelic and innocent looks in their faces. You will only realise their true colours when the loan turns bad and when you try to take legal action, to repossess the car for example, suddenly a few names will come up. The nicknames of your previously "angelic" borrower become known with names with"dragons" in it, "Taiko" (Big Brother), "Pak Long" (also loosely translated to "Big Brother") and other names indicating their "positions" in society. A pain in the ass, sometimes not worth pursuing. Banks can always write new loans, creating "new money" in the process and charge interest to cover for this bad loans many times over. </div>
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Please take note that the above list is just a sample taken from a myriad of combinations. Just a few main samples to give you the general idea. So, the collection clerks and officers have their work cut out for them or so it seems. Collection is not easy and very few people really enjoy it. Well, maybe some really enjoy arguing with people all the time to release stress. Everyday there will be a lot of "opportunities" to have arguments with customers, some minor, some may be full blown confrontations especially during car repossessions and legal actions being taken. </div>
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Sometimes the “whole village” mob can turn up wreaking havoc at the Bank. Therefore debating and oratory skills are very important for the collection guys and gals. The skills of “passing the buck” is also vital, for example in the event of a car repossession. The officer in charge may pretend to be as shocked as the borrower when the car got repossessed since he/she "did not issue" the repossession order and quickly pointed the finger to “Head Office” (very rarely the borrower will call "Head Office" since he/she would not know who to call anyway), the "main suspect" who printed the order. If only the office printer can speak, he/she will be in hot soup. This requires a lot of practice and it goes with experience.</div>
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Typical example of "shocked as a monkey" expression is shown below:</div>
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Therefore, collection is an art, there is no rigid rule or script to follow, it is more of adapting one's particular "behavioural style" to a set of standard procedures. Two collection personnel may achieve their objective by using two entirely different approaches. Sometimes you have to combine together to make it work and that requires great acting skills as demonstrated above. The "Good Guy Bad Guy Routine" ala "Good Cop Bad Cop Routine" and other "scenes" worthy of an Oscar are routinely used especially by those who has been working together for a long time and some "scenes" are simply spontaneous which makes it more realistic. Sometimes you wish those scenes were recorded and can be viewed again and again for entertainment or even for training purposes.</div>
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Collection also involves investigative work so you have to have a sharp mind and eyes for detail. You have to examine clues and leads you gather yourself or gathered by your colleagues which sometimes may not be up to your "high standards". If you have the ability to change the pitch or tone of your voice, it is a great advantage in doing some "telephonic investigation" to gather information. The ability to master different languages and local dialects is also a definite advantage. In short, this job is not for a cry baby and not everybody are cut out to be a collection man or woman. <span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">Maybe we will recreate some of these "scenes" and "CSI stuffs" in future postings.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">Apart from the above, collection staffs also need to be good listeners doubling up as "marriage counselors" or "motivational expert". This is due to the fact that sometimes problematic borrowers will come to pour their sorrows and sad stories as to why they defaulted the monthly payment. Some will come alone and some with their spouse (It is hard to tell whether they are pulling a fast one. They also can play the "game"). Sympathy aside, it is the monthly report that matters so with a "heavy heart" and with words like "there is nothing much that I can do but this decision comes from Head Office" the matter is handled professionally (swept aside). </span><span style="line-height: 1.7;">Sometimes I feel that loan application forms should also include questions regarding the overall health especially the mental health of the borrowers like the one found in Health Insurance forms. It will save you a whole lot of trouble in identifying problematic borrowers.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">So there you go. Some of the things the collection guys and gals do day in and day out. Imagine having to do all this while taking care not to "tarnish" the reputation of their beloved employers (the Banks, of course) and then go back home being exemplary mothers and fathers and repeat the whole thing all over again. Sometimes in the minds of the collection people, how they wish they are doing the loan processing because working at the loans department is more "fun" because they can hang out with the car and machineries dealer (for Industrial Hire Purchase Loan and Term Loan), can have “happy hour” chats and sometimes in order to “please” the dealers in giving “more business” and create “good rapport” they will spend more time together which may include watching football games and some “karaoke” sessions. Customers also are a happy bunch, not to mention having "angelic" traits as described above.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">However, the loan processing staffs have targets to meet in terms of loan disbursements every month and sometimes in their eagerness to reach their target and their "closeness" with the dealers may prove to be their downfall. Being "too close" and "buddy buddy" with the dealers and suppliers may "soften" their hearts or blur their judgment resulting in recommending a loan or putting a "good write up" to get the "borderline" or "extremely borderline" loan approved which may turn "bad" and this has been a "bone of contention" between the collection staff and the loan processing staffs.</span><span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">Sometimes their roles will be switched to have a taste of "the other side" and to the satisfaction of the collection guys, the loan processing staff will have to collect from their own "portfolios" that have turned bad and had gone drown the drain to the cesspool.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">On the other side of the fence, the “collection” gang will usually hang out with repossessors and occasionally with lawyers but it is the repossessors and lawyers who are “buying”. Repossessors will hope to get more repossession orders be it the “easy” ones but with the standard price tag as well as the high priced “wanted” vehicles so they will be the first to choose the "easy" and "juicy" ones.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">As for the lawyers, either they want more cases or hoping to get paid for work done in the past which has been left unpaid, sometimes for years which is the “norm” in the Banking industry. Normally it is the boss who gets the treat from lawyers, and as for the officers or clerks, they may be invited to tag along if they are lucky.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">Before we go into detailed breakdown of the collection process for each type of loan in the next section, it is good to have an overview of the similarities and differences between the legal actions taken to get you mentally prepared for things to come. For those with 1 to 3 months overdue, it is pretty straightforward. No need to move from the office, just pick up the phone and use their “communication skills”. The task is usually given to new clerks or officers under supervision to hone their skills in the techniques of persuasion, soft threats and utter bullshit.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">For car and property loans, organized and scheduled actions are provided for by existing laws such as The Hire Purchase Act 1967 (latest amendment 2012) and the National Land Code as well as the normal legal recovery procedures of issuing Letter of Demand, filing summons and execution of judgments obtained from the court. These loans are categorized as “secured” loans where the “subject matter” of the loan being the car or property is normally used as collateral. The main problem or the added "burden" is the “unsecured” loan such as personal loan or credit card loan where the “collateral” is the “belief” that the borrower shall be able to meet the loan commitments based on the supporting documents of his/her income submitted during loan application. Some may have additional “collateral” in the form of guarantors (which is “easy meat” for threatening borrowers), but with the increasing number of guarantors being made bankrupts for loans that they had little or any benefit at all, that is hard to come by nowadays.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">For the “badly impaired” and “severely impaired” loans, it will take more than phone calls or letters to make them “tick”. Field visit is necessary as an investigative or additional tool to pressure the borrower to pay. The main aim of personal visits is to bring “realism” to the threats as opposed to phone calls which is designed for the “weak” and to bring about embarrassment to the borrower be it to co-workers or neighbours up to a point of the borrower would have no choice but to find some funds to “quieten” things up.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">Now who is the most suitable for this job? Different Banks may have different policies with regards to the field visit personnel. Some may have special units for this purpose. Some might just require the same collection personnel to do everything from making phone calls, print letters, argue (er.. discuss) with customers and making personal visits. Some might “sub contract” the job to debt collection agencies with the promise of a certain percentage of the collection. Some Banks may “sell” the debt outright with a discounted amount usually those they have already written off and may be too “busy” (or the staff has become "weak" or it has become too hot to go out nowadays due to global warming or too preoccupied with existing borrowers) to handle since the account has been declared “dead” or has turned into “zombies”. They may want to concentrate on the “living” loans with higher chances of recovery.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">So there you are. Some snippets about the collection team at the Bank. The same cannot be said about the Debt Collection agencies where they do not have the same kind of training the Bankers guys and gals do. They are not lawyer firms (although they have "lawyer sounding" companies like "Mafia Goons Partners & Co, "Max Pain & Associates" and other "professional sounding" names) and they do not have the legal power to do litigation. All they can do is intimidate and harass the borrower to pay and they are very persistent.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">Whatever they collect is their livelihood and that is understandable but the way some of them go about their methods are highly questionable. A lot of complaints has been lodged on these agencies but the abuses continues. This is a multi BILLION Ringgit industry and it is highly unlikely that these agencies will fully toe the line because it is their most potent weapon for gullible borrowers. The older the loan the better because the interest on the bad loan would be astronomical sometimes running into hundreds of thousands especially for credit card where the actual balance are normally less than 10,000. The normal trick is to offer unbelievable “discounts” of up to 90% (of course if the interest is 100,000 and the actual loan is 2,000, a “discount” of 90,000 would still give a hefty profit with just a few phone calls)</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">That is why the masses need to be informed of their rights and at the same time should be equally responsible for what they have borrowed unless the collection staffs of the Banks didn't do their job properly and have absolved their legal rights to collect the loan within the allowable time limit and simply "pass the buck" (again) to the Debt Collection Agencies hoping to "get lucky" with some of the “old” borrowers which they somehow managed to trace with the advent of technology and “informers” (more on that later) and maybe, just maybe some gullible and ignorant ones not knowing the law of limitation would crumble under their pressure to pay under a few textbook “threats” of legal action and personal visits aimed at embarrassing the borrower to submit payment.</span></div>
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<span data-mce-style="line-height: 1.7;" style="line-height: 1.7;">It is also “good” for the Banks to maintain their “clean and professional” image because if the Debt Collection Agency staffs “misbehaved” or went overboard in their collection methods, it is easy to switch to another one and say the previous one did not follow their guidelines to show “utmost professionalism” (some borrowers will testify that this is utter rubbish) in handling such cases and has since been terminated. This statement will be accompanied by the usual face of "utter shock and disbelief" and the customer may feel "vindicated" before being harassed by another collection agency a few months later. "Lifes goes on" as they normally say. We shall discuss the Limitation Act in more detail with regards to loan recovery in the later part of this article as it needs a special space of its own.</span></div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0Pahang, Malaysia4.5654735507103039 101.096191406252.5387785507103038 98.51440440625 6.5921685507103041 103.67797840625tag:blogger.com,1999:blog-4640177464320153526.post-20125241559144880562014-08-08T15:59:00.006+08:002014-08-10T11:21:37.496+08:00PART 4 - TYPE OF LOAN DEFAULTS<div style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.799999237060547px;">
As I said before, even in “normal” and “healthy” economic climate there are bound to be loan defaults as it is “by design”. “New money” chasing “old money” or ”other new money” to pay for the loan as the interest has “stolen” from the money supply.</div>
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Those who are financially “weaker” will be the ones generally who will default first and others will eventually follow suit. "The design" of USURY or RIBA based system will ensure that new debts will have to be created to pay for the old debt where there will never be enough "money" to go around. For revision of the usurious system, you can visit this link:<br />
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<a href="http://www.slideshare.net/AzharFahruddin/facts-of-digital-and-paper-money-and-how-interest-steal" target="_blank">Facts About Digital Money</a><br />
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When there is an economic crisis, the loan default rates will multiply many times over. This is where the collection department of Banks and Collection Agencies would have to intensify their collection efforts for their own survival like what happened in the Asian Financial Crisis in 1997. During that time, collection was low, repossession of vehicles reached record highs, foreclosures of property were aplenty and Bankruptcy proceedings were rampant.</div>
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The returns from principal and interest were not enough to cover for operational expenses (lower returns of interest portion as loans get "older") and new loans were frozen, so "new money" could not be created with "higher" portion of interest/USURY for the "rolling of expenses". Finally the aid from the government in the form of "bailout" was needed to prevent the Banks from going under and restore the confidence of the people in the monetary system.</div>
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Maybe we will have a special session dedicated to the Asian Financial Crisis of 1997 to reminisce and learn from it in order to at least be "better prepared" for the incoming and expected bigger crisis. Many of you readers may still be too young to remember or even still wearing diapers when the said crisis of 1997 happened so it is good to know.</div>
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Ok, back to the types of loan defaults. The type of loan defaults can be divided into the following categories (these are my classification and might be slightly different from the classification from Banks and Central Banks)</div>
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1) Potential Non Performing Loan – Loans that are overdue from 1 to 3 months. These are sometimes considered “normal” and “active” accounts but need to be monitored closely. Phone calls and simple reminder letters are normally used.</div>
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2) Non Performing Loan or Doubtful Debts – Loans that have the potential to die off and become bad debts. Usually overdue from 4 to 12 months. More frequent follow ups sre required and normally already under litigation.</div>
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3) Bad Debts – Loans which remain unpaid for more than 12 months. Either in advanced stage of litigation and depending on the respective policy of Banks, these accounts may be written off and transferred to a department specializing in “cold” accounts. On the other hand, there are some accounts where legal actions are still undergoing would not be written off just yet, just isolated from the “active” accounts. The “income” from the interest from these accounts will be suspended in line with the guidelines from the Central Bank normally from the seventh month of default until the account becomes active again. For “write off” accounts, whatever amount paid is considered as profit after considering all recovery costs since it has been recorded as a “loss”.</div>
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The loan recovery process in the above three categories depends on the respective internal policies of the Banks. For the 1 to 3 months category, it is normally handled by the Banks staff because it is relatively “easy”, that is by “cordial” phone calls, sms (text messages) and reminder letters which nowadays generated by computers.</div>
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For car loans, it is governed by “The Hire Purchase Act 1967 (latest amendment 2012) where the Banks will have to follow the provisions of the said act in terms of recovery of the vehicle. Legal action may be taken after efforts to recover the car as provided by the act failed.</div>
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As for personal loans and credit card loans “affectionately” known as “unsecured loan” (may be “secured” by a guarantor) the usual process of recovery such as phone calls, reminders, lawyer’s letter of demand, court summons and judgment are used.</div>
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With regards to property loans, the usual recovery process as unsecured loans will be carried out. However, when it comes to foreclosing the property, the Banks would have to abide by the provisions of the National Land Code. Wow! That sounds complicated you might say. Don’t worry, I will try to give a detailed info graphics on each recovery process for each loan category in part 6 of this topic.</div>
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It is hoped that by knowing the procedures especially the TIME FRAME for each legal action, you will not be bullied with impunity by the Bank or the Debt Collection Agency staff with threats such as "TOMORROW we will make you a Bankrupt" or "TOMORROW we will auction your house" or "TOMORROW we will deduct your salary" and a few other "TOMORROWs"</div>
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Nevertheless, we also need to understand that the "collection guys" need to resort to such tactics to pile the pressure on the borrowers to get the debt paid . They are paid to do that and for the Debt Collection Agency staffs, they are actually "collecting" their salary but some have overstepped their boundaries in terms of proper collection guidelines and ethics.</div>
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However, please be reminded that if the proper legal procedures has been followed, the above threats are REAL, the bluff is in the timing and time frame or whether it has been executed at all. This is where the borrowers need to be aware of their rights and at the same time be responsible for the agreement that they have signed with the Banks in the first place.</div>
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As long as they have the legal right to collect the debt (unless prohibited by the Limitation Act due to "expiration" of the right to claim), they (the Banks and Collection Agents) are entitled to do so. I am not teaching you to run away from your debt but to give you the understanding of the collection procedures and the proper collection ethics and the channels in which you might get help. So keep on reading..</div>
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<strong>END OF PART 4</strong></div>
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<strong>NEXT: PART 5 - THE COLLECTION DEPARTMENT</strong></div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-3712671024849591522014-08-08T15:56:00.002+08:002014-08-10T11:21:59.605+08:00PART 3 - TYPE OF LOANS IN THE HOUSEHOLD DEBT PORTFOLIO<div style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.799999237060547px;">
The household loans are typically divided into the following categories:</div>
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1) Housing Loan</div>
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2) Motor Vehicle Loan</div>
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3) Credit Card Loan</div>
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4) Personal Loan</div>
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5) Furniture and Household Items Loan</div>
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Housing loans and car loans are the major contributors to the household debt which is understandable given the relatively young population. The lure of “attractive” (low) interest rates managed to soften the impact of the high price of houses and cars which has escalated over the years. The mix of high interest rates and high prices of these two necessities would cripple demand and is not good for the economy. Malaysians has been "enjoying" low interest rates for several years already which has largely contributed to the huge debt bubble.</div>
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Credit card debts can be seen as a “side loan” or “supplementary loan” (in the beginning) to cater for petrol expenses and groceries and even dinner at “selected” restaurants when money (from wages) runs out especially after the inflation rate has gone up since January 2014. Of course there those who use credit card to satisfy their “compulsive shopping” habits while digging their financial freedom away. Personal loans are normally used for investment purposes in order to ease their financial burden or simply to cover for their already mounting debts scattered like birds’ droppings.</div>
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Personal loans are also used for glamorous engagement and wedding ceremonies successfully propagated by local celebrities which is the trend nowadays in order to “keep up with the Joneses”. This is a recipe for disaster especially if the newlyweds previously had student loans before (called PTPTN here).</div>
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After marriage, loans for furniture and fittings as well as electrical goods are easily available through companies like Courts Mammoth, Aeon Credit and Seng Heng with incredible offers like “you will only pay three months later” or “celebrate your Eid or whatever first and pay later” and of course with credit card type interest rates. Another recipe for financial calamity.</div>
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So there you are. The various types of debt in the household debt stockpile. Sorry for the long introduction because it has to be done to have a clear understanding of the types of debt involved and you will see the reason behind this as we go along in line with the topic “Debt Collection Agencies – The Collection of Current and Bad Debts”. So bear with me.</div>
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With all the monthly loan commitments, some are doing okay with their current income, some are merely surviving which is not bad but many have to resort to juggle their expenses or juggling their time to earn extra income through side business or part time jobs. Some are committing financial suicide by juggling their credit cards or alternating their monthly payment (pay housing loan, miss the car loan or other loan and change the order of payment next month) so that they are always “on the edge” with regards to legal action.</div>
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If everything is stable which means if all prices of goods and services are “static” with no major changes, then well and good. But we are living in a debt based economy where inflation is a necessity. Dependency on the US Dollar as “THE” reserve currency goes to show how precarious is our position now as an economic calamity can happen at any time.</div>
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Domestically, the government burdened with debt would have no choice but to reduce subsidies for petrol and other essential items resulting in escalating prices for most food items, services and utilities across the board. This is where the pressure to keep on paying the monthly payments becomes unbearable and eventually loan defaults becomes inevitable. Those in the “I’m okay” and “I have no problem so far” are also affected. Those “I couldn’t afford it, but I want it anyway” group are already in the financial pit of no return.</div>
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<strong>END OF PART 3</strong></div>
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<strong>NEXT: PART 4 - TYPE OF LOAN DEFAULTS</strong></div>
Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-6071844570474954372014-08-08T15:11:00.003+08:002014-08-10T11:22:12.212+08:00PART 2 – QUALITY OF BORROWERS<span style="background-color: white; font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.799999237060547px;">Another factor that we need to understand is that Banks give loan to a diverse group of people in terms of their “financial strength”, “credit worthiness” or simply the ability to service the loan. Of course Banks are always prudent in giving out loans and screening their borrowers but in some cases, “borderline” and “a bit above borderline” borrowers do exist where loans are given with the assumption that their economic well being might improve over the years with yearly increment of their salary. Factors like recession cycles and global financial instability are not really taken into greater context as the economy is always expected to “grow” indefinitely with inflation being the unavoidable side effect. On the other hand, you may also get loan based on the “know who” technology inside the Bank even though your credit standing is not so good. The “bigger” the person in the hierarchy that you know, the “bigger” and the higher risk loan and lower interest rate you may get and this sometimes happens in the banking circles.</span><br />
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Therefore, in “normal” circumstances where everybody is “chasing” money to pay for their loans, there are bound to be people who will fall on the wayside and normally most of them are the “borderline” cases while there may also be those from the “prime” category due to business failure or some other factors.</div>
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Things will go haywire when there is an economic crisis like what happened during the Asian Financial Crisis due to currency manipulation in 1997 where "good" and "consistent" paymasters suddenly become "bad" borrowers. This situation may happen again with a greater impact given the current state of the global economy and the potential of a global scale war breaking out The after effects of the financial crisis of 2008 is still upon us where we were exposed to major frauds in the financial sectors particularly in the US and Europe. It is said that the US Dollar has lost 98% of its value and even if that is a correct estimate (probably it is a negative figure already), will only be worth RM0.06 sen and this is the value where oil is sold and this is the RESERVE currency of the majority of countries in the world. Now that is really living on the edge! "Owing" money created out of nothing and paying interest on it and having reserves which is basically worthless! Whatever the case may be, default will always occur due to the added value of interest or USURY and much more so in the current state of the economy where inflation has reared its ugly head and more and more people are finding hard to make ends meet and some are plunging deeper into debt just to survive and end up paying more interest in the form of late charges for missing their scheduled payments. If we are to take the above RM755,000,000,000 figure, a default ratio (now with a more subtle name of “impaired” loan) of even 5% will give a figure of about RM38 billion. Ok, maybe some people will say that is too “high” so we will take the “accepted” industry standard of 2% as being “normal” and the figure should be around RM15,000,000,000 (billion) which is also a lot of “money” (mostly in computers) and that is not including normal and compounded interest and late charges (also in the computer, not "released" yet)</div>
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<strong>END OF PART 2</strong></div>
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<strong>NEXT: PART 3 - TYPE OF LOANS IN THE HOUSEHOLD DEBT PORTFOLIO</strong></div>
<span style="background-color: white; font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.799999237060547px;"><br /></span>Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0tag:blogger.com,1999:blog-4640177464320153526.post-13368351919603405722014-08-08T11:23:00.002+08:002014-08-10T11:22:42.248+08:00PART 1: BANKS AND DEBT COLLECTION AGENCY – CURRENT AND BAD DEBT COLLECTION<div style="font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23.799999237060547px;">
<strong>THIS IS NOT AN ADVERTISEMENT ON GET RICH QUICK SCHEME. THIS IS INFORMATION AND TIPS ON HOW TO HANDLE COLLECTION AGENTS.</strong></div>
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Are you currently behind in your loan payment and currently sitting on a pile of debt? Being harassed by Banks lately or by people hired by the Banks called Debt Collection agencies where some of them are masquerading as lawyers? Feeling hopeless, scared and embarrassed by the threats of losing your job, your car or your house? </div>
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Please choose your answer below:</div>
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A: Yes, definitely</div>
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B: Not yet, but coming soon</div>
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C: Maybe, but I think I’m okay (for now)</div>
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D: No, I am super rich, I don’t have a problem</div>
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E: No, I or my father or my grandfather owns the Banks and too big to go to jail. Muah! Ha! Ha! Ha!</div>
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F: I work for the Bank or Collection Agency. Why are you doing this? You are destroying our “weapons”</div>
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G: If this is a get rich quick scheme, I’m sorry, I’m not interested.</div>
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If your answer is D and E, you can skip reading this article. If your answer is G, no this is not a get rich quick scheme. If your answer is F, don’t worry, I understand your problem. There are some borrowers who simply do not want to pay unless sufficiently “pressured” and there are some who are simply a pain in the ass. I may highlight the predicaments of the collection guys in another article.</div>
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I just want to give a level playing field in this area since there are guidelines and procedures to follow and sometimes it has been abused by the Banks' personnel and Collection Agencies' staffs taking advantage of some gullible borrowers even if they “deserved” it. Enough of that and if I need to repeat myself, it is just giving some basic understanding and a level playing field and by the way, I am no angel either.</div>
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If your answer is A, B or C, don’t fret, help is on the way. No, I am going to help you pay your debts, but I would like to share some information that may alleviate your fears and may help you handle the situation in a more subdued or calm manner.</div>
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<strong>MALAYSIA'S HOUSEHOLD DEBT REACHING ALARMING LEVELS</strong></div>
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According to the Central Bank of Malaysia’s recent report, Malaysia’s household debt has reached 86% of GDP, the highest in Asia (congratulations, we are number 1!) which works out to roughly around RM755++ billion (RM755,000,000,000). This figure changes everyday but we have reach a very worrying figure. GDP by the way is subjective and is also financed by debt but we shall discuss that in another post.</div>
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Let’s concentrate on the household debt and by looking at the figure, it is alarming indeed and it may well be close to or already reached RM1 trillion (RM1,000,000,000,000) if we take the “illegal” loans given by loan sharks into consideration.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirNk99aS3kuX4gTWl47Zd-TRBoBT5h2YGZLjY1OKjxjBUQCw1tC9BsWCvWGbXDbZZNDf58dMGZi-dxGPHC7oa0K-sQDNkwsStPg3duDuGIVcB5s1HLzbhNmR2VYW6VLZEr8CIXf0b9ZO_C/s1600/bubble2english.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirNk99aS3kuX4gTWl47Zd-TRBoBT5h2YGZLjY1OKjxjBUQCw1tC9BsWCvWGbXDbZZNDf58dMGZi-dxGPHC7oa0K-sQDNkwsStPg3duDuGIVcB5s1HLzbhNmR2VYW6VLZEr8CIXf0b9ZO_C/s1600/bubble2english.jpg" height="281" width="400" /></a></div>
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<strong>WHEN THERE'S DEBT, THERE WILL BE DEFAULT</strong></div>
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In order to understand “default” in loans, we need to understand the loan creation process. When loans are given, money are created out of thin air digitally as book keeping entries in the Bank’s computer. Interest charged are not created as money but is designed to eat up or steal the numbers from the newly created loan so that in order to service the loan in full, the borrowers would have to take from the existing money supply which incidentally are created in the same manner (with interest) so there will not be enough money unless “new” digital money are created through loans. Confused? Perhaps the diagrams below can give you some understanding.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicPUGA-6dNCH71vHyqiEE4rBUzn_ORrRTU-EI9FHAeK3Wd3TFK9qVCNQFuWaCK1oK-VMIgfDWehQRE6_a94VZSrCTmH6k8be8QyJthzlVkLSvQkaT849KX5GSelUdwtZtrcNjxWwkuZXMe/s1600/bankanginenglish.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEicPUGA-6dNCH71vHyqiEE4rBUzn_ORrRTU-EI9FHAeK3Wd3TFK9qVCNQFuWaCK1oK-VMIgfDWehQRE6_a94VZSrCTmH6k8be8QyJthzlVkLSvQkaT849KX5GSelUdwtZtrcNjxWwkuZXMe/s1600/bankanginenglish.jpg" height="266" width="400" /></a></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDtMhzp52JjGlff5WjNowpl3PD2GkIvABwxImW9cydSOzKkDUiWRWKGTrz0V-YNDl_KYdhuDmd47P90M52fM9kYeNTjiAjLoi4E_FFLYWBGRedwcZbjOgCPEuCPeovxFcUfolVYpes656p/s1600/bankanginenglish2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiDtMhzp52JjGlff5WjNowpl3PD2GkIvABwxImW9cydSOzKkDUiWRWKGTrz0V-YNDl_KYdhuDmd47P90M52fM9kYeNTjiAjLoi4E_FFLYWBGRedwcZbjOgCPEuCPeovxFcUfolVYpes656p/s1600/bankanginenglish2.jpg" height="266" width="400" /></a></div>
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For more details, you can view the slideshare presentation of the "Facts of Paper and Digital Money" here:<br />
<a href="http://www.slideshare.net/AzharFahruddin/facts-of-digital-and-paper-money-and-how-interest-steal" target="_blank">Facts about Paper Money</a></div>
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<strong> END OF PART 1.</strong></div>
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Abu Ammarhttp://www.blogger.com/profile/09140137359172014936noreply@blogger.com0