Kuala Lumpur: Credit Counselling and Debt Management Agency (AKPK), an agency set up by Bank Negara, expects a surge in the number of financially-distressed individuals seeking counselling and debt management services this year.
Chief Executive Officer Mohamed Akwal Sultan said more people might not be able to meet their financial commitments in view of the current economic downturn.
There could be more lay-offs and shorter working hours, rendering people in a tight spot for money.
"Last year, the number of counselling services increased to 41,447 from 25,320 in 2007," he told Bernama.
"AKPK also handled 11,958 cases involving debt management programmes in 2008, an increase from 7,614 cases in 2007," Mohamed Akwal said, adding that he expected more cases on credit cards and housing loans.
The Association of Banks in Malaysia (ABM) recently lowered interest rates for credit cards by between 0.5 percent and 1.5 percent for Tier-1, Tier-11 and Tier-111 credit cardholders.
Late payment fees will be slashed to a minimum of RM5 and a maximum of RM75 effective March 31.
However, many parties viewed the interest rate cut as not good enough.
Mohamed Akwal said the reduction would only benefit the 40 percent who currently elect to leverage on the credit made available under the credit cards.
It may also encourage this group to make more regular minimum payments to move from Tier-III to Tier-I to enjoy the lower interest rate.
He said credit cards should be used as an electronic means of payment mechanism and not a source of long-term credit.
Interest rates for credit cards will normally be higher than other secured loans as the risk is higher.
However, interest rates on credit cards in Malaysia are still one of the world's lowest.
"Though the non-performing loans in Malaysia are not as bad as in the United States, it is crucial for the people to live within their means and only buy things they can afford," he said.
AKPK's counselling services are available to all individuals who need help to manage their personal debts with financial service providers regulated by Bank Negara.
However, there is a qualifying criteria for AKPK's assistance, he said.
An individual has to have an income after meeting his or her expenses, total debt does not exceed RM2 million, not under advanced litigation process and is not a bankrupt.
For financially-distressed individuals, who met the qualifying criteria, AKPK will offer a debt management programme (DMP) to restructure their loans or extend repayment period and flexibility in loan repayment amount to suite their cash flow.
"As long as the DMP applicant abides by the terms and conditions, banks will not take legal action," he said.
According to the profile of individuals who have enrolled into AKPK's DMP, Mohamed Akwal said it was the Malaysian men who were the most debt-ridden.
"In a household, it is usually the man who is the main breadwinner and manages the household. As such, they are the ones who normally take loans," he said.
Mohamed Akwal said AKPK's counselling and DMP are available at all its eight branches in Penang, Perak, Melaka, Johor, Pahang, Terengganu, Sabah and Sarawak.
Two new branches in Kota Baharu and Alor Setar will be opened this year, he added.
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