Politics, Religion don't mix!

In U.S., a growing unease at mixing politics with prayer

By Stephanie Simon

REUTERS - Americans are increasingly uneasy with the mingling of religion and politics, according to a poll released Wednesday by the Pew Research Center, in the midst of a campaign season punctuated by tussles over the role of faith in the public square.

Back in 2001, when Pew first asked the question, just 12 percent of Americans complained that their politicians talked too much about religion.

That number has risen steadily ever since and hit a record high in the new poll: 38 percent of Americans, including 24 percent of Republicans, now say their political leaders are overdoing it with their expressions of faith and prayer.

And more Americans than ever, 54 percent, believe churches should keep out of politics. That's up from 43 percent in 1996, according to the Pew Research Center.

The national poll of 1,503 adults, which has a margin of error of 3 percentage points, was conducted in early March, as the U.S. Conference of Catholic Bishops was ramping up its vigorous campaign against a new federal mandate requiring all insurance companies to provide free birth control.

The bishops continue to press that fight. Just last week, they issued a statement declaring they were "strongly unified and intensely focused" on battling the contraception mandate.

A leading voice in that campaign, Bishop William E. Lori of Bridgeport, Connecticut, this week was promoted to Archbishop of Baltimore by Pope Benedict XVI.

Peter Steinfels, co-director of the Center on Religion and Culture at Fordham University, said Americans have generally tolerated and even encouraged religious leaders to speak out on broad political issues, including capital punishment, immigration and poverty.

MORE SKEPTICAL

But Americans have long been uncomfortable with religious leaders directly involved in partisan campaigns, he said.

In recent years, most notably in the birth control battle, that line has been blurred, Steinfels said - which may account for the growing unease on display in the Pew poll.

"Religious leaders ought to be worried," Steinfels said. "We're seeing Americans becoming more skeptical" about the propriety of religious involvement in politics.

The bishops have sought to portray the contraceptive mandate as one prong of a broad attack on religion by state and federal authorities. The leading Republican presidential candidates have echoed that rhetoric on the campaign trail, accusing the Obama Administration of declaring war on religious freedom.

The Pew poll found evidence that argument is resonating with Catholics. Roughly one in four U.S. voters is Catholic and they are a crucial swing vote in several states pivotal to the 2012 presidential election, like Ohio, Michigan and Pennsylvania.

The poll found 25 percent of Catholics perceive the Obama administration as unfriendly to religion, up from 15 percent in a Pew poll taken in August of 2009.

The increase is even sharper among white Catholics, jumping to 31 percent from 17 percent, Pew found.
Among the public overall, 23 percent describe the Obama administration as unfriendly to religion, up from 17 percent in 2009. But another recent poll suggests the "war on religion" argument isn't gaining traction with most adults.

A national survey conducted this month by the Public Religion Research Institute found a majority of Americans, 56 percent, do not believe religious liberty is under siege.

Republicans, senior citizens and white evangelicals were most likely to see a looming threat to religious freedom.

(Reporting By Stephanie Simon; editing by Marilyn W. Thompson and Todd Eastham) 

Malaysian politicians return of the silly season?

 The happening days are back in Malaysian politics but the seasoned ordinary Malaysians are not even batting an eyelid.

IT’S dubbed the silly season by the media and for good reasons. In the months ahead of the general election, politicians will say the silliest things as both sides of the divide fire at each other. Often, the media get caught in the crossfire.

Many see agenda when there is none, presumably because as politicians they are used to the murky world of self-interest and plots.

Unsure of whether they will get re-elected, or worse, dropped as candidates, many are understandably jittery and overly-sensitive as the pressure builds up. After all, much is at stake.

Wanting to get the attention of their party bosses, they start bombarding media offices with tons of press releases, many of which are hardly newsworthy.

The political minnows are unlikely to get their news across and that’s when news organisations are accused of sidelining them for purported political motives.

Then there are rural-based politicians who wonder why they do not get any coverage at all. They insist on the presence of the press even when most of the newspapers do not reach their constituencies, let alone read by the voters there.

There are politicians who blame everyone for their failings except themselves. Again, their critics and the media get the blame.

There’s another group of has-been politicians. They have held positions including Cabinet posts for what feels like forever but never seem to be able to fade away. They still refuse to find time to play with their grandchildren.

So, come election time, they will find a way to get some publicity, including trying to seek a seat to contest or to quit their party.

Retirement age, it would seem, is only for the ordinary citizens, not for politicians. We have got two generations contesting in polls. We have father-son teams, a husband-wife-daughter team, and with Malaysians increasingly living longer, we may end up having their grandchildren as fellow candidates too.

By now, Malaysians are used to the saying that there are no permanent friends and enemies in politics. So, last week, former Selangor PAS leader Datuk Dr Hasan Ali was accused of spending lavishly during his tenure in the state government, including “wasting” RM300,000 to renovate his office.

The allegation was made by PKR’s Azmin Ali, the Gombak Setia assemblyman, who also said more than RM500,000 was spent on a conference organised by the Selangor Malay Customs and Heritage Corporation.

Barisan Nasional rightly asked why Azmin was only making this revelation after Dr Hasan had left PAS and Pakatan Rakyat.

But politicians always have an answer for every question, no matter how illogical it sounds. Azmin replied that he only received the evidence recently and had asked PAS to probe the matter even before Dr Hasan was sacked.

The state executive councillors are located on the same floor at the state government’s office and no one is going to believe that no one knew renovations were being carried out in Dr Hasan’s office. It’s the same with the purported expensive conference.

Surely, there must have been meetings on the budget allocated for the conference and it is difficult to accept that no one knew about the allocated sum.

Barisan state assemblymen have rightly asked whether these would be exposed if Dr Hasan had remained in PAS and had not rebelled against the state government.

Dr Hasan, in any case, was supported and campaigned for by the same Pakatan leaders in the 2008 elections. The same people who criticised him now are the same people who had heaped praises on him then, persuading people to vote for him.

It’s never a dull day in Malaysian politics – on some days it is amazingly incredible – but at the same time, Malaysians are not getting surprised any more.

Malaysian banks tighten the screening of loans

THE local property sector is expected to see some “cooling down” in the number of transactions this year following the implementation of the responsible lending guidelines by Bank Negara on Jan 1.

According to Real Estate and Housing Developers Association (Rehda) president Datuk Seri Michael Yam, transactions are now taking a longer time to crystallise as banks are grappling with more data required for processing loan applications.

Yam says transactions are taking a longer time to crystallise.

“Buyers are also not committing to purchases until they get clearance from banks that they will be offered the loan applied for, which may or may not be sufficient for them to purchase the property they desire.

“The first segment to be affected is obviously the residential component. For the non-residential, especially commercial properties which may be bought by companies or partnerships, we understand the new formula is not applicable,” he tells StarBizWeek.

Yam feels that the new ruling will have a huge impact on the middle-income segment.

“However, it is common for this group to actually have double (or even) triple incomes from their second and third jobs, but may not have documents to support higher loan eligibility. While prudent risk
management is good, financial institutions must also play a facilitative role in the home ownership agenda by assessing each application on its own merit and not blanket applications across the board.”

He adds that the affordable housing segment will probably be the most affected segment as borrowers are likely to be less affluent, with lower income and disproportionately higher expenditure.

“We predict headwinds for sales in this critical segment, which is contradictory to the wish of the Government to encourage home ownership,” Yam says.

Chang says the entry level market will be the most affected.
In light of this situation, Federation of Malaysian Consumers Association (Fomca) chief executive officer Datuk Paul Selvaraj is urging the central bank to perhaps ease the loan application process, such as making it easier for consumers to switch banks if necessary.

“Consumers, if they feel that they can get a better deal with another bank for their housing or car loan, should be able to do so with ease and at minimum costs. Consumers often feel overwhelmed at the procedures for changing banks. The process should be simplified. The ease of bank switching would promote better quality of services from the banks through competition.

“There should be greater emphasis not only on policy measures but on financial education. Not enough is being done to provide appropriate financial knowledge and skills to consumers,” he says.

One industry observer concurred that the responsible lending guidelines will have the biggest impact on the lower income group.

“This group of people are already earning a low salary and with stricter lending rules, getting loans could be made more difficult.”

National Housebuyers Association (HBA) secretary-general Chang Kim Loong says the responsible lending guidelines will have an impact on the local property sector, especially in the entry level market where aspiring job seekers purchase their first home and for married couples hoping to be able to purchase or upgrade their homes.

Selvaraj urges the central bank to ease the loan application process.
“Depending on location and from state to state, the price ranges from RM150,000 to RM500,000. This is the price range that speculators have been targeting in the past and have artificially inflated such property prices, but it's still too early to gauge the effectiveness or effects of the responsible lending guidelines.

“It is hoped that as property speculators are denied financing to purchase such homes and with only real demand in the picture, the prices of such properties will gradually decline to more realistic prices.”

According to reports, applications for loans for the purpose of purchasing residential properties contracted 6.3% in January from a growth of 11.3% in December 2011.

Yam says Rehda understands that the implementation of the rationale for responsible lending guidelines was due to the large household debts and the 40% increase in transaction value (from RM100bil to RM140bil) between 2010 and 2011.

“On the short to medium term, this restriction would ultimately cause a slowdown in borrowing which is the intended effect, and it will cause a negative effect on home ownership.

“The mixed signal arising from this new lending rule is that while on the one hand the Government is encouraging the building of more affordable medium-cost housing by introducing “My First Home Scheme” and “PR1MA” homes to stimulate demand, on the other we have this Bank Negara announcement,” he says.

Yam feels that the central bank's new lending criteria seems to be in contradiction to the earlier Budget announcement in October last year.

“This does not sit well with developers who are taking the cue and feel positive about home-buyers being offered greater opportunity and various incentives to own homes only to be somewhat dampened by this new requirement,” he says.

Positive measure?

Khong & Jaafar Sdn Bhd managing director Elvin Fernandez says he is supportive of Bank Negara's responsible lending guidelines.

“The new rulings are good because they are pre-emptive measures to prevent a housing bubble. The measures are making themselves felt as price increases in some hot spots that were a cause for concern have now stalled and also the trend from it spreading down the line or to other areas have also been curtailed.

Fernandez supports the guidelines as they prevent a housing bubble.
“House prices rising are not good. Prices rising with fundamentals such as household income and rental returns are good,” he says.

Chang also applauds Bank Negara's responsible lending guidelines.

“The guideline requires the financial services providers (FSPs) to provide assessment of individual affordability and provide suitable and responsible advice to customers on their capacity to take on additional financing,” he says.

According to Chang, the FSPs or banks will be required to undertake a comprehensive assessment on borrowers' sources of income and verify against independent sources to ensure that they have the ability to repay the loans throughout the tenure of the loan.

Income assessment shall be based on the borrowers' net income, which is the gross salary minus the statutory deductions such as Employees Provident Fund contributions and tax deductions.

“HBA has been advocating for a very long time for FSPs to exercise prudence and good judgment when disbursing loans. Due to stiff competition and key performance indicators set by the board and senior management, (FSPs) have been too lenient and aggressive in providing financing, resulting in artificially inflated property prices and many young adults being declared bankrupt due to their inability to repay their debt obligations,” says Chang.

Chang says that as part of the responsible lending guidelines, Bank Negara has repealed its requirement of a maximum debt service ratio (DSR). For the uninitiated, the DSR means that the debt repayments are divided by the borrower's income.

According to him, prior to the responsible lending guidelines, the maximum DSR was set at one-third (or 33%) of gross income for single loan repayments and half (or 50%) of gross income for all loan repayments combined.

The exception was given to civil servants who could borrow from the cooperatives with a DSR of up to 60% of their gross income.
“Hence, if the borrower's gross income is RM3,000, the maximum single loan repayment is RM990 and maximum aggregate of all loan repayments cannot exceed RM1,500 per month,” Chang says.

Under the responsible lending guidelines, the DSR based on gross income has been repealed and FSPs are now free to set their own DSR based on the net income of the borrower.

Chang says the issue now will be that prospective borrowers do not know if they would qualify for a loan as different FSPs have different DSR guidelines.

“There is a shock-effect with FSPs being told to totally disregard all forms of variable income such as discretionary bonuses, commissions and overtime and prospective borrowers that are dependent on these types of income are adversely affected.

“Based on our market sources, some FSPs are willing to consider these types of income but at a discounted rate and this causes great confusion to prospective borrowers as they attempt to shop around for loans,” he says.

Rehda feels the affordable housing segment will probably be the most affected.

 

Chang says HBA is urging the central bank to retain its “maximum DSR” requirement “to set a cap” as guidance for FSPs to follow.

“As it is, even with the previous guidelines on one-third and half, many FSPs have openly flouted the guidelines with reckless financing, resulting in artificially-inflated property prices and many young adults being declared bankrupt due to unmanageable debt levels.

“With the caps removed and FSPs being free to set their own lending policies, the situation of reckless financing may get even worse. Although HBA agrees that market forces are the best form of regulation, it has been shown that we operate in an imperfect market and hence the need to retain DSR limits for FSPs to follow,” he says.

As a means to improve lending, the HBA is also calling on the central bank to issue additional guidelines on the recognition of variable income, where the borrower can show a good track record for such income.

“This is because certain industries such as in the sales and manufacturing sectors, the basic income is often very low and the discretionary income serves as an incentive for employees to perform.

“If such discretionary income is to be totally disregarded, it is feared that such employees may never qualify for any sort of loan from legal channels and end up resorting to loan sharks.”

By EUGENE MAHALINGAM eugenicz@thestar.com.my

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Reining in household debt by Bank Negara Malaysia

The responsible lending guidelines, among the pre-emptive measures by Bank Negara to contain surging household debt, have made a strong impact on most people. Will the guidelines be effective to control the alarming levels of household debt and put the brakes on loan growth? 

THE responsible lending guidelines, which came into effect on Jan 1, created quite a stir in the banking industry with leading indicators signalling further signs of loan growth slowing in the coming months.

There is some discontent among consumers in terms of having their loans approved based on net income compared with gross income previously, in addition to which is the need for more documentation.

Some automotive players and property developers are not too happy either as they feel the move will be a dampener to their business moving forward. Loan growth for January was lower at 12.1% year-on-year (y-o-y), probably the slowest since 2010, compared with 13.6% y-o-y in December last year mainly due to slower growth in the household and business segments.

Total application and approval for loans in January was down almost 3% from a year ago although those disbursed rose by 5.6% y-o-y.

Loans in the household sector, which has a high level of indebtedness, was dragged down by slower growth in auto, mortgage and personal loans. But some quarters argue that this could be attributed to shorter working days in January due to the Lunar New Year break and other holidays.

Officials say that a loan growth in the region of 12% appears to be fine and much stronger growth may be a problem if left unchecked.

Indications are that loan growth to households, which was lower in 2011 than 2010, will normalise in February this year after the dip in January.

Whatever the arguments are, this trend, if it does continue, can be seen by some quarters as worrisome. Will loan growth then continue to slide? Some industry observers and analysts think so.

Loan growth mixed signals

Under the guidelines, banks are, among others, required to apply the net-income calculation method instead of gross income when computing the debt-service ratio for potential borrowers. The lending guidelines cover housing, personal and car loans, credit cards, receivables and loans for the purchase of securities.

Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias says based on indicators, the rating agency feel that loan growth will likely moderate this year to a single-digit figure compared with a 13.6% growth recorded last year.

Nor Zahidi says the stricter guidelines is a step in the right direction.

This is due to the fact that some potential borrowers will no longer be eligible for certain types of loans, he says. This, he adds, is evidenced by a steep drop in the volume of passenger cars sold in January by 25% compared with the same period last year following stricter hire-purchase loan processes.

Total vehicle sales, however, rebounded by 9% in February with industry sales hitting 44,013 units from 40,387 units in February 2011.

Going forward, Zahidi says he foresees further decline in the banking sector loan growth as banks continue to be extra prudent in their lending practices, adding that there are also declines in loan applications for cars, credit card and residential properties based on latest indicators.

Loan applications for purchases of passenger cars contracted by 15.5% in January from 7.8% growth in December 2011. Another significant drop was the application for the amount given to the credit card segment which fell by 50.9% in January from a decline of 10.2% in December 2011. Applications for loans for the purpose of purchasing residential properties contracted 6.3% from a growth of 11.3% in December 2011.

Approvals for loans categorised for “personal uses” declined by 29.8% compared with a 42.4% growth in December 2011 while the amount of loans approved for the purchase of passenger cars and residential properties contracted by 18.4% and 20.9% respectively in January (December 2011: 0.3% and 1.8% respectively).

The Association of Banks in Malaysia (ABM) says the implementation of the guidelines will not have a direct relation to its member banks' loan growth. Factors like global economic conditions and its impact on the regional economy as well as developments on the external and domestic front will be the more pertinent factors that will have an effect on loan growth, it says.

“The guidelines merely set out to better define the expectations of banks to act responsibly and transparently when lending. The policies and practices envisaged are not entirely new as they underscore the existing approach taken by our members. While it will ensure that the debt commitments of individuals and households are within their repayment capabilities, customers who can afford to repay will not be denied access to financing,” it says.

A robust retail finance market, ABM says, cannot be measured by loan growth alone as the obligations (financial and contractual) to repay, sound personal financial management skills and responsible financing practices are more important to the stability and sustainability of the market in the long run.

Weaker numbers

The occurance of non-performing loans and loans in arrears appear to be falling, and they are what bankers and regulators are paying close attention to. That will indicate that the responsible lending guidelines, even though they may crimp the longer-term trend, is not having an impact on the quality of existing loans.

Wong expects loan growth to taper to 8%-9% after clocking in a strong 14% last year.

 

CIMB Research says in one of its notes that it expects a slowdown in loan growth this year due to weaker numbers from all major loan segments including residential mortgages and auto loans.

RHB Research Institute considers that on the whole, the new guidelines will have some impact on household loan growth, but the extent of the impact remains to be seen.

As for demand for loans from the household segment, the research outfit does not think the growth will fall off the cliff, but rather will be at a more moderate pace relative to recent years.

Jupiter Securities head of research Pong Teng Siew feels that with the strict adherence to the lending guidelines, loan growth may hit 8% or less sometime later in the year but may pick up in some months.

OSK Research is maintaining its loan growth projection for this year at 9% despite the guidelines which it says will play a part in slowing loan growth. The projection was underpinned by Economic Transformation Programme (ETP) projects.

RAM Ratings head of financial institution ratings Wong Yin Ching expects loan growth to taper to 8%-9% after clocking in a strong 14% last year.

This, she says, will be supported by expectations of a real gross domestic product growth of 4.6% in 2012 (2011: 5.1%) and a more moderate household loan growth due to various prudential measures introduced since late-2010. Loans growth is said to be correleated to economic growth and with the Government seeing growth to come in at 4%-5% this year, expectations are that the pace of loans given out will accelerate at a slower pace.

Wong says the loan growth will be partly balanced by stronger financing demand from the corporate and commercial sector in anticipation of the rollout of projects under the ETP and 10th Malaysia Plan gaining momentum.

Meanwhile, Maybank IB Research, with a neutral call on the banking sector, says it expects domestic loan growth of 10.5% this year, up from its previous forecast of 9.4%, adding that mortgage lending is expected to hold up better than anticipated.

According to Bank Negara's Financial Stability and Payment Systems Report 2011, the growth of household debt to gross domestic product (GDP) increased last year but the pace was slower with outstanding household debts expanding by 12.5% to 76.6% for the year compared to 2010 when debt grew 13.7% to 75.8%.

It adds that signs of stabilisation in household debt relative to GDP was seen from the second half of last year after a continued upward quarterly trend observed since 2009 with borrowing continuing to be concentrated on residential properties and motor vehicles, which together account for 64% of total household debt.

The report states that bank lending to individuals earning more than RM3,000 per month accounted for about 80% of total loans to households by the banking system.

Choo says the guidelines will not have any adverse impact on those with genuine capacity to repay.

It adds that bank exposure to borrowers with monthly incomes of RM3,00 or less was relatively low representing less than 13% of total banking system loans. “Based on historical experience on the level of impairment and provisioning, any impairment losses to banks are not likely to exceed RM2bil or less than 8% of pre-tax profits of commercial and Islamic banks,” it notes.

The growth in household debts had also been accompanied by a corresponding expansion in household financial assets, it says, adding that stronger growth in household deposits which expanded by 12.2% balanced the slower increase in financial assets.

Timely move?

Despite the brouhaha surrounding the pre-emptive measure, many feel the introduction of the guidelines is timely and justifiable.

RAM's Wong views it as one of the many measures to contain the growth of household debt.

The banking system's household financing has been rising steadily over the last five years and currently constitutes about 55% of the system's total financing, she says, noting that the growth has stemmed mainly from home and personal loans.

As a result, she says, Malaysia's household debt-to-GDP ratio has trended upwards from 69% in 2006 to 77% in 2011. Compared to other countries in the region, this figure is considered high especially when looked at in relation to GDP per capita, she adds.

Some of the other pre-emptive measures which Bank Negara had earlier imposed to control rising household debt include tighter criteria for residential property financing, such as a 70% loan-to-value (LTV) cap on a borrower's third housing loan and beyond, as well as raising the income eligibility criteria for credit cards.

Some analysts concur that the lending guidelines are vital to ensure quality loan growth and some form of control is necessary. With ringgit deposits slowing, analysts expect banks to start pulling back on lending even in the absence of the guidelines.

Zahidi says the guidelines are introduced to ensure that the consumer segment will not be overstretched for too long. While it will take a few years before Malaysia's household debt can be reduced to below 60% of GDP, the stricter guidelines is a step in the right direction, he says.

However, he adds that this will have some adverse effects on the banking sector's loan growth as well as on private consumption.

OCBC Bank (M) Bhd country chief risk officer Choo Yee Kwan says credit assessments under the guidelines are done holistically by taking into account the total debt obligations of an individual borrower and will not have any adverse impact on those with genuine capacity to repay.

At the same time, he says, it will help to deter borrowings for speculative purposes and align debt burden more closely with repayment capacity.

 

Cavale says the long-term impact on banks is yet to be determined.

“While the guidelines are relatively prescriptive on the lending approach, they are really complementary when viewed from the vantage of a bank with more advanced risk assessment tools and portfolio screening and early warning triggers for sustainable loan portfolio health,” Choo explains.

A banking analyst from MIDF Research, on the other hand, thinks that while the guidelines on the whole are good, some details are vague and not properly spelt out. For example, there is no mention of specific details on liability as well as on debt servicing ratio, and is left to individual banks to assess the risk appetite of loan applicants.

Citibank Bhd managing director for cards and consumer lending Anand Cavale feels that while the guidelines will strengthen the control for lending, the long-term impact on banks is yet to be determined.

Although it will help reduce the level of household debt, this will depend on the state of the economy, as household debt is directly linked to the performance of the country's economy, he says.

While the guidelines will strengthen the overall ability to lend prudently, Cavale believes there should be proper infrastructure in place. For example, banks having accessible ways to the customer income information will help the process to implement the guidelines more smoothly, he points out.

Other areas of focus

Some analysts feel the stringent lending guidelines may cause banks to shift their focus to other areas to boost their bottomlines.

The MIDF Research analyst says banks may, for example, look to increase high net worth individuals or affluent customers for their credit cards as in the case of Malayan Banking Bhd. This, he adds, will include cross selling of cards to this segment.

For the mortgage side, banks may look into issuing more financing for landed properties in selected locations and for the auto business, they may source for stronger dealership, the analyst says.

Choo says OCBC Bank's objective is to derive 30% of its income from non-interest income sources, noting that it is keen to diversify and strengthen its deposit base to ensure it is not overly concentrated in any one specific segment.

According to Cavale, it is likely that banks will add other products or services that will support additional streams of income to mitigate potential reductions in the lending area.

Another area which banks are aggressively pursuing currently is the small and medium enterprise (SME) segment. This segment, according to an analyst with an investment bank, will provide better margins and probably make up for the shortfall in slower loan growth from the stringent guidelines.

Those banks which were not focusing on the SME segment will now have to employ strategies to capture this growing segment, he adds.
  
By DALJIT DHESI daljit@thestar.com.my

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American Student Loan Debt: $1 Trillion and Counting

Day 3 of the protest Occupy Wall Street in Manhattan's Zuccotti Park. (Photo credit: Wikipedia)

Whatever happened to the American dream of going to college, landing a great job and living happily ever after? College is supposed to be about getting off to a great start, but it’s a financial noose that threatens to kill our young and everybody else too. The U.S. has the dubious distinction of now having more than $1 trillion in outstanding student loan debt.

 The crisis has the full attention of the Consumer Financial Protection Bureau which in a recent blog , presented its sobering findings. “Unlike other consumer credit products, student debt keeps growing at a steady clip. Students borrowed $117 billion in just federal student loans last year. And students continue to borrow private student loans, which lack the income-based repayment and deferment options of federal student loans. If current trends continue, there will be consequences not just for young people, but for all of us,” wrote CFPB’s student loan ombudsman Rohit Chophra.

Worse still, he writes, according to data from the Department of Education, federal student loan debt isn’t growing just with new originations — with so many borrowers unable to keep up with interest payments, debt is growing even for many who have left school. Too much debt means too much risk for a generation of young people, many of whom are struggling in today’s economy.

What’s the impact? Excessive student debt slows a recovery still trying to find its sea legs. Study after study has shown that young people are delaying the traditional rite of passage of launching out on their own and starting families. With so much debt, on average about $26,000 for undergrads, and many unemployed or underemployed, they are running back home, instead of looking for their first apartment or home.

 A decidedly grim picture could get worse. In July, if Congress doesn’t get its act together and takes some of the momentum of a crisis with explosive potential, a 2007 law that kept federally subsidized Stafford loan interest rates low will expire this summer, meaning the rates will double from 3.4 to 6.8 percent. This is more bad news on top of the real possibility that proposals to financial aid may become reality – the Pell Grants could move from mandatory to discretionary spending, meaning who knows what will happen, but likely none too good. There is also a bill to repeal the expanded Income-Based Repayment program, that lessens the sting of college students by letting them pay back what they own in proportion to their salaries.

The CFPB is working with the Department of Education, and launched a Know Before You Owe project , to solicit input on a “financial aid shopping sheet”. The sheet is designed to help students understand the debt implications of their college choice. CFPB is supervising private student loan providers to ensure they comply with Federal consumer financial protection laws and CFPB is providing tools for borrowers to help them navigate their student loan repayment options. A newly established student loan complaint system will help ensure that private student lenders and servicers are responsive to potential mistakes and problems that borrowers encounter. This summer, the CFPB will release the full results of its private student loan market.

Where is the outrage over the continue increase in tuition at a time when some colleges are raising salaries for their presidents?

 Just this week a plan was approved to give pay raises to two university presidents in California. This comes at a time when the California State University system is grappling with a $750 million budget shortfall and is considering limiting enrollment for the spring semester.

There’s something so wrong with this picture. Students will pay the price, families will pay the price, society will feel the ramifications for some time to come.

By Sheryl Nance-Nash, Forbes Contributor Newscribe : get free news in real time 

Malaysian Consumer Protection (Amendment) Act 2010 deals with unfair contract terms

Remember our series of articles on unfair contract terms? Well, it now seems that the Malaysian Parliament is set to finally come up with a law addressing the issue in the upcoming Consumer Protection (Amendment) Bill 2010.

Preferring the approach of amending an existing statute to enacting a wholly new one, the Bill inserts a new Part into the existing Consumer Protection Act 1999, namely Part IIIA intituled Unfair Contract Terms. This Part contains new sections 24A to 24J all intended to address the issue of when businesses seek, via standard form contracts, to impose on consumers terms excluding or limiting their liability when they arise, as well as other terms thought generally considered unfair. Section 1(3) provides that the Part applies to contracts entered into after the coming into force of the Bill.

Section 24A deals with general interpretation in connection with the Part. The definition of a contract in section 2 of the Contracts Act 1950 is retained and a “standard form contract” is defined as a consumer contract that has been drawn up for general use in a particular industry, whether or not the contract differs from other contracts normally used in that industry. An “unfair term” is defined as a term in a consumer contract which, having regard to all the circumstances, causes a significant imbalance in the rights and obligations of the parties arising under the contract to the detriment of the consumer. Section 24B states that notwithstanding the Contracts Act 1950, the Specific Relief Act 1950 and the Sale of Goods Act 1957 as well as other provisions of the law for the time being in force, the Part shall apply to “all contracts”. This presumably addresses implied terms regarding sale of goods in the Sale of Goods Act 1957, specifically sections 14 to 16 of that Act regarding transfer of title and issues of merchantability and fitness for the purpose for which goods are bought. The section fails to mention the Hire Purchase Act 1967, of which section 7 also deals with implied terms in hire purchase agreements. Also should the Part really extend so broadly so as to include all contracts? Presumably if such is the case, a contract or contract term proscribed by law, such as those in the Schedules to the Housing Development (Control and Licensing) Regulations 1989, or financial or securities contracts, or contracts or bills of consignment or lading, be included as well?

Section 24C and 24D are probably the most important sections in the new Part. The Malaysian Parliament has preferred to split the question of unfair terms into two, dealing with terms that are procedurally unfair (section 24C) and substantially unfair (Section 24D). Section 24C(1) proscribes that a contract term is procedurally unfair when

i. It results in an unjust advantage to the supplier (ie. the business relying on the term in question) and/or;

ii. It results in an unjust disadvantage to the consumer;

iii. On account of the conduct of the supplier; or

iv. On account of the manner or circumstances that the contract is entered into between the supplier and the consumer.

Section 24D(1) holds that a contract term is substantially unfair when;

i. it is in itself harsh;

ii. it is oppressive;

iii. it is unconscionable;

iv. it excludes or restricts liability for negligence;

v. it exludes or restricts liability for breach of express or implied terms of the contract “without adaquate justification”.

The approach of splitting the dealing with such terms into procedurally unfair and substantially unfair is rather unique and this author knows not of any other jurisdiction within the Commonwealth that has chosen this approach. It is also, in this author’s view, rather needless and unneccessary. A substantially unfair contract term is neccessarily procedurally unfair as well. The two are not mutually exclusive. There is also the troubling question of what would about to inadaquate justification for breach of express or implied terms of a contract. When is the justification adaquate and when is it not? Presumably this follows the approach of determining if whether the exclusion of such terms are fair and reasonable or not, but for this to work the statute itself must give an account of what “adaquate justification” amounts to rather then just simply leave the matter for the courts. Such an approach would be in tandem with those used in other jurisdictions, such as the United Kingdom in their Law Commission’s proposed Unfair Contract Terms Bill 2005, specifically clase 14(1) which provides a test on how contract terms are deemed not fair and reasonable. It is also noted that Malaysia has decided that exclusion or limitation of liability for negligence is to be disallowed outright rather than having it hang on whether such an exclusion or limitation is fair and reasonable or as the Bill puts it “without adaquate justification”.

Sections 24C(2) and 24D(2) at least partially follow the approach of Clause 14 of the UK Bill  (specifcally Clause 14(4) )when they list the considerations to be had when determining when a contract term is procedurally or substantially unfair. The considerations are mostly the same between the soon to be Part IIIA of the Consumer Protection Act 1999 of Malaysia, and Clause 14(4) of the Unfair Contract Terms Bill 2005 of the United Kingdom, and again the latter does not contain needless distinction between what is substantively and what is procedurally unfair. The new section also fails to provide an example of a list of terms that can be thought unfair unlike the corresponding Clause in the UK Bill.

Section 24E states that it is for the supplier (ie the business) to prove that the contract term is with adaquate justification. This is the same as Clause 16(1) of the UK Unfair Contract Terms Bill 2005. Section 24F provides that a court or the Tribunal established by the 1999 Act may deal with any issue of any unfair contract term even if none of the parties has raised the matter, again similar to Clause 21 of the UK Bill.

Section 24G(1) enacts that a court or the Tribunal may declare an unfair contract term under sections 24C and 24 D to be void and subsection (2) is not unlike Clause 24 of the UK Unfair Contract Terms Bill which provides that other clauses of the contract affected are to continue in force without the offending term. Section 24H further provides that a term of a contract can still be held void even if it has been partially or wholly executed. This is a novel idea as it provides more certainty as to the position of the parties in the midst of a continuing contract.

Section 24I makes the contravention by “any person” (as defined under subsection (1)) of the Part an offence. The section is silent on how exactly is the Part contravened. First of all, why “any person”? Is it possible for the consumer to commit an offence under the Part? Or is the inclusion of any unfair contract term by a supplier/business to be made an offence? If this is so, it should have been clearly spelt out. There is also a host of other matters that arise by making unfair contract terms an offence, for instance, it could inhibit freedom of contract. The high penalties involved (RM 250,000 for a first offence and RM 500,000 for a subsequent offence, as well as RM 2,000 a day in which the offence continues) could also be pontentially crippling for small businesses. Other jurisdictions have so far not seen the need to make any inclusion of an unfair contract terms an offence and while the merits of such a move are debatable, it is suggested that a comprehensive study on the move be done at first.

Section 24J empowers the Minister to make Regulations in connection with the Part. This section could provide an avenue to remedy two important defects discovered so far, namely the failure to indicate the extent of the application of the Part and the types of contracts involved and secondly, the failure to provide an list of examplary contract terms that might be thought unfair.

The proposed new Part IIIA of the Consumer Protection Act 1999 as will be introduced by the Consumer Protection (Amendment) Act 2010 contains many weaknesses, all of which could and should be addressed by enacting a single comprehensive piece of legislation on unfair contract terms, rather then by simply amending an existing statute. It does not, for example, include unfair notices. Thus while a consumer can now worry less about whether he or she may claim under a defective contract, the same might not be said for a notice, for example, one notice excluding liability for negligence when using a swimming pool or car park, for example, is not covered by the new Part on a plain reading of the Bill, which clearly limits its scope to standard form contracts, and does not mention notices. This is in spite of Domestic Trade and Cosumer Affairs Minister Datuk Seri Sabri Yaakob’s claims to the contrary.

The Bill also makes an unneccesary distinction between procedural and substantive unfair contract terms. It fails to make provision as to what types of contracts exactly are covered by the Part and extending the application to “all” contracts could possibly have unexpected and unfavourable ramifications. It crucially also fails to address the issue of application taking into account where the contract is concluded (ie whether in or outside Malaysia) or what happens when a contract applies foreign law. A test for determining what amounts to “without adaquate justifiaction” is absent, as well as a list of examples of unfair contract terms. What offence created is not clearly defined and the potential effects not carefully studied.

On the other hand, initiative is demonstrated by providing that a term of a cotinuing contract can also be struck down on account of being unfair. On the whole, it is remarked that some form of bulwark against unfair contract terms in consumer contracts is better then nothing but there is room for improvement. It is hoped that those that be can revisit the issue in the future and consider seperate, more comprehensive legislation on the matter instead. It would be interesting, however, to see how the Malaysian courts react to the new legal provisions on unfair contract terms, especially concerning if they would follow the approach of their foreign counterparts in deducing unfair terms, or create their own notions based on the new provisions.

5 July 2010 by Alistaire 

THE LEGAL IMPLICATIONS OF THE CONSUMER PROTECTION
Consumers Association of Penang

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Dos and don’ts when leaving for a new job

 EVERYONE has heard of Greg Smith. After all, it's not every day that a top executive at Goldman Sachs resigned in such a public and high-profile way. He told the whole world, via an op-ed piece in The New York Times, that he could no longer stomach the company culture which he described “as toxic and destructive as I have ever seen it”.

Hailed as a hero by many, especially on the social media sites, Smith was nevertheless also castigated by commentators who questioned his real motive. “The reason he's been at Goldman Sachs for 12 years is that he liked the name and probably liked the money,” one wrote.

We all learn, from day one, that we should never burn our bridges when we part ways with our employers. After all, we no longer live in an era where we serve only one employer throughout our working life.

Rolling stones do gather a lot of moss these days.

So while employers do understand when we move to greener pastures, they are unlikely to be sympathetic to you if you decide to badmouth them on your way out.

And bosses do talk to other bosses, more so if you work in a niche industry where everyone knows, well, everyone.

A Goldman Sachs sign is seen above their booth on the floor of the New York Stock Exchange, in this January 19, 2011 file photo. A Goldman Sachs executive director published a withering resignation letter in the New York Times, saying the investment bank is a "toxic and destructive" place where managing directors referred to their own clients as "muppets." - REUTERS

 

As much as I salute Greg Smith for his courage to place his resignation letter in the public domain, I think the rest of us mortal souls will prefer more down-to-earth advice on how to quit a job.

I am no expert on this but here is a short list of dos and don'ts which may be useful.

1. Don't bash your boss, or your company, on social media or anywhere else

It is amazing how people on FaceBook share so openly about the goings-on in the office, including all the nasty stuff about the bosses. Hello there! If stupidity is an acceptable reason for you to lose your job, the boss will show you the door straight away. Sometimes, even private conversations in public places, like restaurants, can have ramifications beyond your control.

Someone who intends to hire you may have second thoughts as chances are if you say bad things about your previous boss, you are more likely to say the same about him. A good principle to follow is: Don't say anything about anyone in private what you would not say in public.

2. Don't play poker with your offers

After you get an offer, you may be tempted to check if your boss would make you a counter-offer. The people who play poker with their offer letters are those with huge egos who think that the office cannot run without them.

Although some employers may play along and give you the raise you demand, you can be sure that the relationship will never be the same again.

3. Do keep your options open

It has been said that no one leaves a company but a boss. So, while a situation may arise where you no longer find it easy to work with your immediate boss, always remember that circumstances may change which may make it possible for you to return to the company in the future.

So you may have to eat humble pie if your exit remarks are vicious and harmful to the reputation of the company. I can't imagine Greg Smith getting a job at Goldman Sachs again, unless he buys the company.

4. Do be professional to the last day of employment

All of us have to give notice before quitting. It's not as dramatic as what we see in the movies when you are immediately told to pack up and go. So from the time you give your notice until the official last day, conduct yourself with full professionalism. If there are things to pass on, do so in an orderly manner. Say your goodbyes without being too emotional about it.

5. Do stay away from your old office

I got this advice from a friend many years ago. He said it is natural, when you move into a new job, that you will actually regret having made the move. In a new environment, you suddenly yearn for the old job where you are comfortable with friends.

Many make the mistake of going back to hang out with their former colleagues and this only adds to their frustrations. His advice: Make a conscious effort to keep away from your former colleagues for at least six months. Concentrate on your new job and build up new relationships first. Then hanging out with old friends after that won't be so traumatic.

Deputy executive editor Soo Ewe Jin is glad that a new column, Talking HR, is now available on StarBiz every Tuesday. All of us in the working world will benefit from the good advice given by the professionals.