YLKI urges IBRA to aid consumer credit debtors

Fitri Wulandari, The Jakarta Post, Jakarta

The Indonesian Consumers Foundation (YLKI) is urging the Indonesian Bank Restructuring Agency (IBRA) to help thousands of people who received loans from banks that were subsequently shut down by the government in the wake of the 1998 financial crisis.

YLKI official Mohammad Ichsan told The Jakarta Post on Tuesday the problems were mainly the result of administrative confusion after IBRA took over the loans from the closed banks.

He said that last year YLKI received some 40 complaints from consumers, which he said was quite a high number.

The most common problems consumers faced, he said, were related to their mortgage payments.

For example, some of the new bank creditors are demanding borrowers repay more of their loans than necessary, because the original documents went missing when IBRA transferred the loans from the closed banks.

So when some consumers began making their loan payments to the new banks, they have to begin totally anew because the records of their earlier payments to the closed banks have been lost.

Some consumers are also being forced to pay interest penalties for delays in their loan payments. However, these delays were often caused because the borrowers were not informed as to where to make their payments after their original banks were shut down by the government.

Ichsan said the administrative mess occurred because neither the government nor IBRA had made sufficient preparations before shutting down banks.

He said IBRA must take the responsibility of resolving these problems or risk a class action lawsuit from borrowers.

The government shut down dozens of banks in the late 1990s as it undertook a restructuring of the country's ailing banking sector. IBRA, which was established in 1998, took over the loans of these closed banks. The agency then sold these loan assets at huge discounts to other banks, mainly Bank Danamon and Bank Artha Graha.

In total, IBRA took over some Rp 600 trillion in bank assets, including consumer and corporate loans, as well as fixed assets from ailing banks and indebted bank owners. The agency is responsible for restructuring and selling the assets to raise cash to help finance the state budget deficit.

Against all common case, Ichsan said, people with home loans were not supplied with clear information about the new payment system or which bank would take over their loans.

"It's not that the customers are reluctant or unable to pay their installments, but they just simply do not know where to go to pay their mortgages.

"IBRA failed to anticipate these problems," Ichsan said.

Some borrowers have also asked for some sort of reduction facility because their debts have multiplied due to the punitive interest rate environment of the late 1990s, when the central bank allowed interest rates to skyrocket to more than 70 percent to curb inflation and help the weak rupiah.

The borrowers argue that the punitive interest rate environment should be considered a case of force majeure.

An employee at a media company who obtained a home mortgage from the now defunct Bank Bira, for instance, was informed by the new creditor, Bank Artha Graha, that his debt had jumped to Rp 98 million from the initial loan of Rp 68 million.

Other borrowers have also complained of being hounded, and in some cases threatened, by debt collectors from their new bank creditors.

However, the banks say that in the majority of cases, borrowers are simply try to avoid repaying their loans.