PSM issued the challenge after ABM explained it was common practice for banks to obtain a power of attorney for properties without titles, but it was a precautionary measure and banks still provided adequate notice to affected borrowers.
Speaking to FMT, PSM secretary-general A Sivarajan said the fact that it was only “common practice” and not a requirement by law was the exact point the party was making.
“The house buyers are unable to challenge this because the agreements, especially the Deed of Assignment, clearly states that the bank can begin the foreclosure procedure without notice.
“Thus, it’s more of a goodwill gesture, through common practice, that banks give some form of notice,” he said.
He said that since such notices were not required by law, banks did not have to ensure the notice was served in a proper manner.
“Some banks argue that proof of postage is good enough.”
Sivarajan noted that ABM had said it was a requirement for banks to attempt to contact the house buyers and offer alternative plans.
However, he said, these were internal and left to the banks themselves.
Without an overseeing authority, there was still room for abuses.
“The key point is that all the recommendations and requirements are not mandatory as they are not obliged by the contracts signed between the buyers and the financier via the Deed of Assignment and Power of Attorney.
“Our proposal is that the current wordings of these agreements such as ‘absolute assignments’ need to be reviewed because they are legally binding and, in the current format, deprive the buyers of their rights.
“We ask Bank Negara to review these matters and ensure that banks will insert clauses that protect the buyer in these security agreements. Currently, in our opinion, these provisions are lopsided.”
ABM had denied the legal language used in the agreements was complex, adding that any legal terminology would be explained to the customer.
Sivarajan begged to differ.
“Anyone who has had his house financed by the bank and went through the process of signing these documents can testify that they are not in plain language understood by the layman, worse still for the working class from the bottom 40%.
“On this matter, we agree with ABM that legal and technical terminology should be avoided and presented in plain language. We advise ABM to take a proactive measure to advise their members on this issue.”
‘Banks must give notice before acting against defaulted borrowers’