Banks using loophole to get around the moratorium
Published on: Sunday, May 10, 2020
By: Cardholder
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I REFER to the loan moratorium announced by Bank Negara Malaysia recently.

While I laud Bank Negara for providing this financial relief, I have noted that the moratorium grants automatic six-month deferment to all loans or financing except for credit cards.

I wish to ask Bank Negara to clarify how it defines the term “credit card”. This is very important because after the moratorium was announced, some banks began to creatively categorise some loans as “credit card”, thus denying the much-needed financial relief to the loan recipients.

Over the past several years, some banks have been aggressively promoting cash loans that purportedly share the same credit limit of the credit card. Essentially, these banks call up their existing credit card customers and offer them cash loans, which are structured like car loans and have a flat rate, fixed tenure and fixed monthly instalments.

Cash loans also have separate accounts with their own unique numbers and the balance (and all transactions) involving these loans are kept separate from the credit card.

Banks say the cash loans are structured in such a way as to share the same credit limit as the credit card, hence no supporting document is needed from the applicant.

After Bank Negara announced the loan moratorium, the banks informed borrowers that the cash loans are categorised as “credit card”. As such, the automatic six-month deferment does not apply and borrowers would have to make the repayments as per the original schedule.

This is unfair because these cash loans actually meet the criteria published by Bank Negara for automatic six-month deferment. Therefore, it is imperative that Bank Negara explains to the public clearly what “credit card” means in this context because this appears to be a loophole that some banks are now exploiting to circumvent the moratorium.

In my humble opinion, the term “credit card” should only refer to a proper credit card, i.e. a financial product that has a number and the necessary features (such as expiry date and CVV code) to conduct credit card transactions.

Other loan products that purportedly share the same credit limit with a credit card but cannot be used to conduct any credit card transaction in actual fact should be treated as separate credit facilities and their eligibility for automatic six-month deferment evaluated on their own merit instead of being lumped together as “credit card” and denied the financial relief altogether.

 





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