THE Federation of Malaysian Consumers Associations (Fomca) has slammed the government and the central bank for allowing Touch ‘n Go Group (TNG) to charge up to a 36% interest rate for its newly launched micro-lending scheme.

Fomca secretary-general Dr Paul Selva Raj chided the Finance Ministry and Bank Negara Malaysia for showing no regard for consumer welfare.

“At this time when consumers are suffering economically due to job  loss, income reductions and a significant increase in the cost of living, the government and its GLCs should be taking measures to help consumers through access to low interest  credit not allow banks and their subsidiaries to charge exorbitant interest rates and cause critical financial burden on consumers,” he said in a statement today.

“The Finance Ministry and BNM as regulators should be acting to protect consumers from abusive and unfair practices.”

“Yet they seem not only to give the green light to this unjust scheme but are actually willing to be a part of their marketing team to promote their product. It appears that for the Ministry of Finance it is more important that banks make exorbitant profits rather than consumer’s welfare and well-being be protected.”
 
Last week, TNG launched the GOpinjam on its e-Wallet platform. Jointly developed with CIMB Bank Bhd, it offers personal loans from as low as RM100 to RM10,000.

The repayment period can range from one week to one year, with no hidden fees or early settlement charges, said the website.

Interest rates vary from 8% to 36% per annum, depending on the amount and duration of the loan.
 
The interest rate for personal loans from commercial banks is between 4-7% per annum. Credit cards can only charge 15-18% interest per annum for credit.

Selva Raj urged BNM to clarify if the TNG loan adhered to the financial regulator’s lending guidelines.

He added TNG’s pledge to be transparent and upfront is not enough.

“What is shocking is that it claims that it adheres to Bank Negara Malaysia responsible lending guidelines. Can the regulator clarify if charging 36% for loans targeted at the underserved adheres to “responsible lending practices”?  

“TNG claims that it would be transparent and upfront. Clearly it is not enough to be transparent, banks are expected to act in a manner that is fair, just and non-abusive to consumers. The regulator’s function is to ensure that. Ah Longs and loan sharks can also be transparent. Will they be licensed next,” Selva Raj said.

Selva Raj stressed that Putrajaya must act urgently to stop the profiteering and critical harm that the GOpinjam scheme poses to consumers.

“Interest rates for loans should not exceed that which is charged by credit cards and if the government is genuinely concerned that the poor would not have access to credit, then it should have schemes in which the interest rate is lower than credit cards not higher.”

“But if the government is only interested in banks making exorbitant profits, then it would turn a blind eye to consumer protection and consumer welfare. It appears that financial consumer protection is dead. Fomca truly regrets this stand.” – April 8, 2022.