Sunday July 26, 2009
By DZIREENA MAHADZIR
If you find yourself mired in debt or have lost control of your finances, don’t turn to loan sharks! There is a legit and logical way out.
IMAGINE you have a job like mine, one that allows you access to the latest products in the market, cool and beautiful things, and, yes, discounts when you wish to make purchases. If you’re not careful, before you know it, you’ll be spending more than you earn.
Actually, you don’t need a job like mine to have the urge to shop. Shopping is just an inherent desire to own the newest and best of everything – which can turn out to be quite frivolous and useless.
So when the bills pile up and the creditors start calling, what do you do? Go to a loan shark and risk having paint thrown on your front door, or, worse, suffer threats to the safety of your family when you can’t repay what you’ve borrowed?
There is an alternative!
The Credit Counselling and Debt Management Agency – more familiarly known by its Malay acronym, AKPK, for Agensi Kaunseling dan Pengurusan Kredit – is a subsidiary of Bank Negara Malaysia that provides free financial education and counselling and debt management services to individuals who are in financial trouble because they spend more than they earn.
AKPK chief executive officer Mohamed Akwal Sultan says most of those who approach the agency for help have problems managing their credit cards and loans.
The first step the agency takes when a person seeks help is to provide financial counselling.
“We will help him manage his finances by looking at ways to trim expenses,” Mohamed Akwal explains. AKPK may also suggest ways to increase income, for example, by taking a part-time job.
If these measures don’t help, it then proceeds to debt management. To begin with, it simplifies re-payments: “Most people who are in debt have at least five financial institutions to pay. But under AKPK, they only need to pay into our account, and the money will be apportioned to the institutions to which they owe money.”
He stresses that the AKPK does not take over the loan; instead, it acts as an intermediary between the debtor and the financial institutions seeking repayments.
The moment someone comes under AKPK, there will be a stay of legal action against him; this means that any and all legal action pertaining to his fiances will be stopped, Mohamed Akwal explains.
The debtor explains his financial situation to the agency’s counsellors – and he is expected to bare all and be completely honest in this. Once the counsellors have determined the extent of his debts, they will work out monthly re-payment amounts.
However, this does not mean that the person will be left with nothing to live on, of course. They will deduct all his vital expenses first (food, rent, children’s needs), then calculate the payments based on what’s left. If he needs an extra job to supplement his income, they will suggest it, Mohamed Akwal says.
Each case is unique, but always, the AKPK’s priority is ensuring debtors don’t suffer in paying off their bills – neither the debtor nor his family will have to starve in the course of paying off the debt, he assures.
However, they will have to undergo a complete lifestyle change, which may mean no luxuries until every sen has been paid off. There is no rigid repayment period, as that depends entirely on the amount owed (the cap is RM2mil). He has had people coming to ask how to pay off a RM1,000 debt!
To qualify for the debt management service, various factors must be in place. First, the loan needs to come from financial institutions regulated by Bank Negara. There should be positive net disposable income after meeting expenses but before paying the banks; the total debt cannot exceed RM2mil; the debtor is not under advanced litigation and have not been declared a bankrupt.
Part of that lifestyle change mentioned before is surrendering credit cards. No, the AKPK will not do anything as dramatic as cutting up the cards in front of the debtor! But it will ask that all credit cards are given up. Anyway, people who have had to turn to the AKPK for help would probably have had their cards cancelled already.
“Once you’re under the scheme, the respective financial institutions will be notified, and your information will be placed into the CCRIS (Central Credit Reference Information System, Bank Negara’s database of borrowers from which financial institutions can obtain credit reports).
“When you come to us, we can stretch the repayment to 10 years, though that doesn’t mean everyone gets 10 years.
“The interest rates we recommend to the financial instituitions under the debt management program are 6% to 9% and they will comply.”
Of course, one has to bear in mind that AKPK does not possess legal powers and cannot force the banks to accept any of its proposals. So, how difficult is it to get that acceptance?
Mohamed Akwal says, “More than 90% of the recommendations we make under our debt management programmes have been approved by the financial institutions involved,” since the AKPK was set up in 2006.
What happens when those under the AKPK scheme don’t pay the agency on time?
Well, you’d better have a good reason – like you were sick or have been laid off.
Should you be late or lapse on a payment, agents will contact you to find out why. Reminders will also be mailed out. If all these fail, you will be terminated from the programme.
No, there are no threats of harm or paint-splashing! But once you are taken off the programme, the banks you owe money to will be informed, and you’ll find yourself back on square one. So, as Mohamed Akwal says, it makes sense to pay as scheduled.
Know your limits
So how would you avoid becoming mired in debt? The answer lies in financial education.
The AKPK has several on-going programmes that focus on basic money management skills, using credit responsibly, and saving for the future. It has come out with a book, Money Sense, which emphasises how you can be in control of your finances regardless of your financial situation.
“Malaysians do not save enough,” Mohamed Akwal opines. “You should put aside 10% to 20% of your monthly income, and have at least six months of savings that you can draw upon in an emergency. If you don’t have savings and an emergency crops up, that’s when you max out your card or borrow from the wrong sources.”
He also suggests using a debit card, which automatically deducts the amount you spend from your bank account. This way, you will definitely know how much you have left. Not that the AKPK is against the use of credit cards, Mohamed Akwal stresses.
“It is a fantastic tool that has many benefits; it saves the country money in terms of having to deal with less paperwork. You can also track your spending habits through your statements.
“But credit cards come with responsibility. It is not a licence to spend money that you don’t have, so you need to know your limits.”
For more information on the Credit Counselling and Debt Management Agency, or AKPK, and its services, go to akpk.org.my or call its toll free number 1-800-88 2575.
How AKPK can help you
- Financial education: Programmes on basic money management skills as well as tips on how to use credit responsibly.
- Financial counselling and advice: Personal counselling and advice on managing your finances wisely, from budgeting to money management and credit related issues.
- Debt management programme: Counsellors and financial service providers will work with you to develop a personalised debt repayment plan.
All these services are free of charge. For more information on briefing sessions, seminars, and road shows, or to make an appointment, call 1-800-88 2575 toll free. Note that the AKPK does not provide loans or financing. – From akpk.org.my