Is not a bank no better than the 'Ah-long' when it increases the monthly loan repayments from the original instalment of RM7, 000 to RM10, 000 in less than three years? When the borrower protested he was told that the loan agreement allows the bank to do so.

Banks have been making consumers sign unfair contracts and getting away with it. It is time that Bank Negara Malaysia (BNM) put a stop to this

In the above case the bank (Public Bank Bhd) pointed out that under the agreement the loan is 'subject to yearly review for increase in repayment amount'.

In September 2000, the borrower had signed up for a fixed loan whereby the monthly instalment was agreed at RM7,000. In October 2002, his monthly instalment was revised to RM8,000. In April 2003 it was again increased to RM10, 000.

However, the borrower continued paying RM7,000 every month because he could not afford the new instalments. He was shocked that the instalments were increased because he had been servicing his loan faithfully.

The excuse the bank gave for increasing his instalment was that the borrower was old and if the monthly instalment was increased, the loan could be settled earlier.

(Of course, if the borrower could not meet the increased payments, the properties pledged to the bank could be auctioned off and the loan would also be settled earlier as the bank intended).

In another case a borrower took a loan from a finance company (AM Finance Bhd) whereby the interest charged was zero percentage points above the base lending rate (BLR). When the operations of the finance company was consolidated with a commercial bank (AM Bank Bhd) in the same group, she assumed that she would get to enjoy lower interest since the BLR of the bank was 0.9 percentage points lower than that of the finance company.

However the bank informed her that the interest margin on her loan was now increased from zero to 0.9 percentage points. As a result, she ends up paying the same interest on her loan. Many consumers have been mislead into thinking that the interest rate or the margin above the BLR at which interest is charged is fixed.

The clause which gives the bank the absolute discretion to change the interest rate or the monthly repayment should not be allowed in any loan agreement. Where it appears in any agreement, the clause should not be enforceable.

To add salt to the wound, the borrower paid for the fees of the lawyer firm which drew up the agreement. The borrower is forced to pay the legal fees but is not allowed to choose his own lawyer (the firm has to be from the bank's panel). He has no choice but to sign the loan contract skewed in favour of the bank.

The problem of unfair contracts is much older than that of excessive service fees and charges and BNM has not taken steps to right the imbalance. BNM should heed consumers call for the introduction of fair loan agreements and let the banks pay their own legal fees.