Bank Negara Malaysia (BNM) has found that some terms and conditions in housing loans and financing contracts are disproportionately skewed in favour of banking institutions, to the detriment of consumers.
"These included terms and conditions that provide absolute exclusions or limitations of a banking institution's liability and obligations, and place undue reliance on signed declarations to assert that financial consumers have read and understood a contract," BNM noted in its 2018 Financial stability and Payments Systems report.
"In addition, some terms and conditions were found to be unnecessarily complex with the use of excessive legal and technical jargon that did not aid clear understanding by consumers," it added.
Following the bank's thematic review on the matter last year, banking institutions are now required to revise these unfair terms and conditions, as well as improve clarity through the use of plain language, for both new and existing housing loan and financing contracts, by end 2019.
"In addition, the Association of Banks in Malaysia (ABM) and the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) are working with banking institutions to review the standardised key terms and conditions for housing loan agreements involving a principal sum of RM500,000 and below to address concerns that have been raised by the bank," it said.
The bank is also readying a set of standards — to be issued in the first half of this year — that set out its expectations for the board and management of financial service providers (FSPs) to promote a culture where the interests of consumers are an integral part of business operations.
In addition, it said FSPs must act in good faith by ensuring fairness of contract terms, providing clear and concise product information, offering appropriate advice or recommendation based on needs and financial circumstances of their customers, and exercise due care, skill and diligence when dealing with them.
"While these standards have long underpinned the bank's requirements on market conduct, bringing these standards together aims to promote and reinforce a 'whole-of-institution' approach to ensuring that FSPs do not behave in a way that could harm financial consumers.
"This in turn will provide greater confidence to financial consumers that they will be treated fairly at all stages of their relationship with FSPs," it added.