DNR: Saving the young from bankruptcy

Have you ever heard about the story of a man who was only in his 20s when he committed suicide after coming under pressure to settle a RM13,000 debt with a bank? At his funeral, someone was overheard saying: "If only he had sought the help of AKPK, he would be alive today."

AKPK is the abbreviation of Agensi Kaunseling dan Pengurusan Kredit or Credit Counselling and Debt Management Agency, a unit under Bank Negara Malaysia set up six years ago to provide free counseling to consumers on proper management of debts with financial institutions. It also helps those in financial distress negotiate with banks on restructuring their debts. As an added service, AKPK also offers its personal financial module to institutions of higher learning which could be made an elective study course or embedded in the curriculum. This is to train lecturers who can then educate students on how to properly manage their finances once they join the workforce.

AKPK chief executive officer Koid Swee Lian related the young man's tragic story to me a few days ago in the wake of a front-page exclusive report in Berita Harian that said some 50,000 people below the age of 34 were declared bankrupt in the country over the last five years. Most became insolvent so early in life due to credit card debts and car loans.

Koid said she believed the situation would have been scarier with many more falling into traps that could lead to bankruptcy, if not for AKPK's intervention. So far, the agency has counselled almost 200,000 people at its branches, out of which about 82,000 have been taken under its Debt Management Programme (DMP). The DMP enables AKPK to talk to banks on the customers' behalf on matters ranging from holding back legal action to restructuring their debts in accordance with their ability to pay.

Major causes of bankruptcy & financial problems:

#1.   credit card debt

#2.   multiple charges besides the interest rates, that credit card users have to bear and are mostly unaware of, hidden in fine print that they have to consider before swiping their cards

#3.   for the ladies, overspend on handbags and smartphone

#4.    expensive wedding expenses

#5.   overspend to celebrate festivities like Hari Raya, Chinese New Year and Deepavali

#6.    all sorts of scams

#7.    unreliable get-rich-quick schemes

#8.    rising cost of living

#9.    no savings

#10.  rampant practice of not paying their balance in full

#11. car loans – high dependency of car due to largely unreliable public transport system

#12.  cars are very expensive in Malaysia