Proper processes in place before actions are taken on defaulted borrowers

November 17, 2017
Kuala Lumpur, Thursday, 16 November 2017 – With reference to the article in a local media portal titled “Contracts that allow banks to oppress apartment buyers”, The Association of Banks in Malaysia (ABM) would like to provide clarification in relation to the allegations made.

Generally, for properties with title, in the event of default, the properties will be foreclosed through the relevant court process. In such cases, the borrowers’ rights for adequate notice and due process are determined by law. Conversely, for properties without title, it is common practice for banks to obtain a power of attorney from the borrower to allow the bank to sell the property in default. This arrangement is a precautionary step to protect the banks in case of such occurrence. However, banks do still provide adequate notice to the affected borrowers in respect of properties without title.

Our member banks are required to adhere to the standards set by the regulator in relation to the recovery of properties in default to ensure that it is made in a responsible manner. Further, banks are also required to engage with borrowers early for alternative repayment arrangements. It is a requirement for banks to have in place proper processes including sufficient notices before action is taken against defaulted borrowers. In particular, banks are required to comply with the following:-

  1. Upon detecting any signs of repayment difficulty, banks will proceed to contact customers promptly and proceed to engage in early discussions towards alternative repayment measures to address financial difficulties;
  2. Banks must make reasonable efforts to offer an alternative repayment plan that is appropriate to a customer’s changed circumstances and financial situation with the aim of resolving genuine repayment difficulties of the customer;
  3. Banks must give adequate information for the customer to understand the implication of any proposed repayment arrangement including possible recovery actions if the customer continues to default such as legal and foreclosure proceeding; and,
  4. Foreclosure on the customer’s property (all type properties) can only be initiated when other reasonable attempts to reach a resolution have been unsuccessful (including to conduct their own private sale before the bank does so).
  5. Bank documents such as contracts, agreements and policy documents are required to be presented in plain language so that it is easy for readers to understand. In instances whereby, the use of legal and technical terminology cannot be avoided, the meaning of these terminologies would be explained or printed in a glossary for reference.
Thus, while there are different types of loan documentations applicable for housing loans, there are adequate rules to ensure the interests of the borrowers are protected.

Members of the public may contact ABMConnect at 1300-88-9980 or via eABMConnect at for any enquiries or complaints related to housing loan matters.
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