IPOH: Banks should adopt the principle of non-recourse loans to protect the vulnerable and needy, says a consumer association.
Perak Consumers’ Association president Abd Rahman Said Alli said such a loan would be in line with the government's Malaysia Madani concept to protect those who need help, especially property owners who are facing financial problems.
Abd Rahman said a non-recourse loan would prevent the lender from going after more than the collateral offered for the loans.
He said such loans are beneficial for the borrower because the lender cannot seize or demand cash or other assets to recoup their losses if the auctioned property is insufficient to cover the total loan amount
"We are aware that all the expenses, including valuation expenses, legal fees and mortgage reducing term assurance, are borne by the borrower and not by the bank," he said in a statement.
"As the lender, the bank is free from all these expenses but ensures all the clauses in the loan agreement in its favor by ensuring a specific panel of lawyers where the borrowers must go to.
"We demand that this benefit should cover all borrowers who purchase properties using bank loans," he added.
Abd Rahman said the whole system of lending and recovery is stacked up against the well-being of the borrower.
He said the non-recourse loan would be a fair way to ensure banks do not recklessly allow their staff to work with unscrupulous agents to dispose of properties at prices unfavourable to borrowers.
"We know of a borrower who is contemplating suicide because the bank wants to auction away his property and bankrupt him.
"They are aware that he will be unable to pay the balance of the loan, which will not be covered by the auction," he said, adding that banks should also bear some risks in their trade like any other businesses.