Credit card abuse behind bankruptcies
NST 4/10/2005 R. Sonia

PUTRAJAYA, Mon.

The misuse of credit cards is expected to be behind most of the 17,000 bankruptcy cases nationwide this year.

Insolvency Department director-general Halijah Abbas said today that many of them would wind up on the list for not being able to make credit card payments. The rest were those who stood as guarantors for loans.

She said more than 1,000 became bankrupt every month, with more than 100 companies being wound up monthly.

She said this at a Press conference called by Deputy Minister in the Prime Minister’s Department Datuk M. Kayveas after the launch of "e-insolvency", an online individual bankruptcy status enquiry as well as an online company liquidation status enquiry.

Kayveas was representing Minister in the Prime Minister's Department Datuk Seri Radzi Sheikh Ahmad.

Kayveas chastised companies and individuals who used small advertisements in newspapers to advertise bankruptcy proceedings.

"They must make sure the advertisements are big enough for people to read. This was not the court’s intention when allowing substituted service. The person who is summonsed should know he is being served."

Bankruptcy proceedings allowed lenders to use substituted service if they could not serve papers on borrowers personally.

On being discharged from bankruptcy, he said the Government should look at fixing a lower amount for those who were innocent.

He cited husbands who got their wives to sign as guarantors and disappeared.

He said abandoned projects were also to blame for people being declared bankrupt.

"I don’t think that is fair. A person takes a loan and the developer abandons the project. He is then declared bankrupt and has to stay in a rented house, and he still does not get the house he took the loan for," he said.

In an immediate reaction, Consumers Association of Penang officer Uma Ramaswamy said applications should be scrutinised and eligibility should be made more stringent.

"Now, everyone can apply and get a card. We should have a cash society, not a cashless one. With a credit card, the temptation to spend is there and many do not realise they’re heavily in debt," she said.

Uma added that it should be made compulsory for at least 50 per cent of their credit card bills to be settled by credit card holders every month.

Federation of Malaysian Consumer Associations president N. Marimuthu said it was vital for banks and financial institutions to provide consumers with credit education.

"They have given us 1,001 ways on how to spend but they never told us about bankruptcy and its consequences."

E-insolvency can be accessed via www.myeg.com.my, www.eservices.com.my and www.rilek.com.my.