Credit Reporting Agencies in Malaysia : What is CENTRAL CREDIT REFERENCE INFORMATION SYSTEM (CCRIS) and CREDIT TIP OFF SERVICE (CTOS)?

This is an excerpt from my next book. The book's working title is 40 Questions You Should Ask Your Lawyer Before Taking A Housing Loan in Malaysia, another book under Ask The Lawyer series. I am targeting for it to come out next year, 2014. Do get my new book 40 More Questions You Should Ask Your Lawyer Before Buying a Residential Property in Malaysia here. Any questions, comments and inquiries are welcomed.

CCRIS and CTOS are credit reporting agency, a newly-governed industry in Malaysia. People applying for housing loans in Malaysia will have their financial information checked by the financial institutions they are applying the housing loan to. Here is excerpts for one of the question in my book under the title above :

Central Credit Reference Information System (CCRIS) is an online credit checking system operated by Bank Negara Malaysia with all Malaysian’s resident’s credit information in the system. As long as that person has an identification card and credit history, he can check his credit history in CCRIS. CCRIS is managed by the Credit Bureau of the Bank Negara Malaysia since 1982 and formed under the Central Bank of Malaysia Act 1958. The Credit Bureau collects the credit information of any borrower from all financial institutions in Malaysia and then issue a credit report when it is requested by any of the financial institutions governed by Bank Negara Malaysia. Central Credit Reference Information System is a computerised database and there is nearly more than nine millions borrowers’ credit information currently being stored by Central Credit Reference Information System. All the information about the function of Credit Bureau and Central Credit Reference Information System, can be found in the Bank Negara website on Credit Bureau : http://creditbureau.bnm.gov.my.

The financial institutions are required to report the name, identification number, address and credit facility details such as type of credit facilities, credit limit, outstanding balance, conduct of account and any legal action status. A borrower can check your Central Credit Reference Information System report at Bank Negara or Bank Negara’s various branches in Malaysia. A borrower cannot ask a representative to check his own Central Credit Reference Information System report. Under the various banking laws including Banking and Financial Institutions Act 1989, Islamic Banking Act 1983 and Central Bank of Malaysia Act 1958, confidentiality is imperative in dealing with Central Credit Reference Information System report. It can only be released with a financial institution authorised by an applicant for a housing loan or any other loans to get the Central Credit Reference Information System report from the credit bureau. Upon getting the Central Credit Reference Information System report, the financial institution and its officer can only use it to process the loan and not use it for anything else such as marketing its products

Financial institutions giving housing loans or any other loans to borrowers in Malaysia need up-to-date information about the applicants of the loans. Central Credit Reference Information System is where these financial institutions go in order to get the credit history of the borrower. The Credit Bureau sourced the information from all licensed commercial banks, Islamic banks, investment banks and several other financial institutions. In order to ensure the borrower’s data is up-to-date, verifications are done against the data at the National Registration Department and Companies Commission of Malaysia. Here are the list of information listed in the Central Credit Reference Information System report :-

1.       Outstanding credit including housing loan, hire purchase, credit card, overdraft and personal loan;

2.       Special attention account under close supervision by any financial institution; and

3.       Application for credit

All these three types of information will be for anything under the applicant’s own name, joint name with another person, sole proprietorship, a partnership or a professional body.

Any account fully settled or application rejected, deleted or cancelled are not included in the report. Credit repayment behaviors are listed at the end of the report for outstanding credit report or special attention credit report with 1, 2 or 3 or more stated according to the month in a year for the last twelve months. These can affect certain loan application, including housing loan. Any financial institution processing an application from an applicant of a housing loan will give special attention to any account with late or missed monthly installment payments, high debt servicing ratio between the borrower’s take home income and the debt the borrower already have, high utilisation of approved credit such as credit card, too many loan applications and any loan under litigation or special attention account. Unless it can be disputed, it is good for a borrower to clear some of the debts before applying for a housing loan.

Any borrower can dispute your credit report in Central Credit Reference Information System by first going to the bank which has entered the wrong information and then at any of the Bank Negara branch. Any financial institution supplying the inaccurate report must rectify any inaccurate or incomplete information immediately by sending it to the Credit Bureau. The financial institution is obligated to reflect the latest credit position of the borrower. A data review by the Credit Bureau can be done if the borrower is not satisfied with financial institution. The borrower can get and filled the Request for Data Review form to do a data review. It can be downloaded from the Credit Bureau website and then submitted to any Bank Negara Malaysia’s branches.

Credit Tip Off Service (CTOS) is a different form of credit report used by some financial institutions in Malaysia. Credit Tip Off Service is not related to Bank Negara Malaysia or any government agency and it is not endorsed by any of them. Credit Tip Off Service is run by CTOS Data Systems Sdn Bhd, a private company, better known as CTOS Sdn Bhd. The website for CTOS Sdn Bhd is http://www.ctos.com.my/ with its office in Megan Avenue 1, Jalan Tun Razak, Kuala Lumpur. CTOS Sdn Bhd collects data made public in news, court filings of legal proceedings allowed to be made public by the court, Companies Commission of Malaysia, information provided by the borrower and any of the borrower’s creditors, people or companies the borrowers registered with such as clubs, memberships and even include utilities companies. CTOS Sdn Bhd also collects a person’s directorship in companies either listed or not and all his sole proprietorship or partnership holdings. CTOS Sdn Bhd is registered under Credit Reporting Agencies Act 2010 and governed by the Securities Commission of Malaysia. Any refusal by CTOS Sdn Bhd to update its record can now be reported.

A few people claimed Credit Tip Off Service is an illegal gathering of information by a private company and is a blacklist. There a few evidence of this as CTOS Sdn Bhd is a company gathering information made public relating to credits and liabilities. CTOS is a lead information system with clients that need to check a particular person or company’s background, especially financials, in their normal course of business such as bankers, legal firm, insurance company and credit card companies. CTOS Sdn Bhd does not update their database or delete a settlement on any of the borrower’s case automatically unless the borrower or the person being checked informs CTOS Sdn Bhd of such matter. CTOS Sdn Bhd also claims it is not a blacklist report. Having a credit report under CTOS Sdn Bhd does not mean an applicant of a housing loan will not get approved. Applicants may receive a rejection from the bank the borrower is applying for a housing loan with the word ‘CTOS issue’ and the best course it to get in touch with CTOS Sdn Bhd to know what is the issue if the bank is unwilling to divulge the information. Getting credit especially a housing loan from a financial institution is still about the borrower proving himself to be credit worthy. Any data from CTOS Sdn Bhd is a public record and a borrower can get this record at his disposal too. A settled court case or a bankruptcy already being settled will have proofs and the borrower can update the financial institution the borrower is applying the housing loan with the proof.

The difference between Central Credit Reference Information System report and Credit Tip Off Service report is the weight given to each report. Most financial institutions give more weight by rejecting a housing loan application when they found the applicant has a ‘CTOS issue’. Central Credit Reference Information System is run by Credit Bureau under Bank Negara Malaysia, with banking laws to back the collection of information. Credit Tip Off Service is not imposed on financial institution as it is not run by any government agency but is supervised by Securities Commision. Other than these two agencies, there are several other credit reporting agencies such as Financial Information Service Sdn Bhd (FIS) and SME Credit Bureau Sdn Bhd. The unscrupulous use of a borrower’s or an individual’s information, especially financial information by any agency under Credit Reporting Act 2010 shall be reported to Securities Commission. With the coming of the Personal Data Protection Act 2010, the usage of personal data on individuals by financial institutions are now under another layer of scrutiny including disallowing the financial institutions’ credit department to divulge an applicant’s or a borrower’s data to its marketing department unless expressly allowed by person.

40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia

My new book is out. It is now in bookstores around Malaysia. You can get it at those bookstores like MPH, Kinokuniya, Popular and others. If you cannot get it there, get it online here at my publisher's online bookstore :

Book Planet link for 40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia

If you still have not buy my first book, you can get it online too at this link :

Book Planet link for 40 Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia

Or its Bahasa Malaysia equivalent :

Book Planet link for 40 Soalan Yang Patut Anda Tanya Peguam Anda Sebelum Anda Membeli Rumah di Malaysia

The Bahasa Malaysia version of the new book is still being edited and hoping for it to come out in April 2013.

Update on 40 More Questions You Should Ask Your Lawyer Before Buying a Residential Property in Malaysia

As of 6th February 2013, I have finally edited the final draft of the manuscript for 40 More Question You Should Ask Your Lawyer Before Buying a Residential Property in Malaysia. I have also sent the first draft of the Bahasa Malaysia equivalent of the book entitled 40 Lagi Soalan Yang Anda Patut Tanya Peguam Anda Sebelum Membeli Rumah Kediaman di Malaysia.

I was told by the publisher the book will be sent for distribution in April 2013. As the first book is still selling well, there will be a reprinting to ensure the books will be sold side by side. My publisher, True Wealth Sdn Bhd is now doing its own distribution.

The first book has been a great marketing tool for my medium-sized legal firm. As I was told by Azizi Ali who is someone I learned how to invest in property 13 years ago and is now a friend, a client and a mentor, it is better to hand someone a book with your name written on it than a business card.

Thanks to my first book, I became more than just a lawyer. I am now a lawyer, an author, a speaker and even a point of reference for prominent people. Last Monday I met Mr. Piya Sosotikhul, the grandson of Boonsom Boonyanit of the Boonsom Boonyanit vs Adorna Properties fame who now has a Facebook page Justice for Boonsom Boonyanit vs AdornaProperties as he found me through my book. An honor and I can consider it as a landmark in my career as a lawyer. Mr. Piya was looking for an avenue to help more than his family as he learned how his family's case has become a landmark in Malaysia legal system.

I am writing my next book which will unravel the mystery of housing loan. The working title is 40 Questions You Should Ask Your Lawyer Before Taking a Housing Loan in Malaysia under the Ask the Lawyer series of book.

I don't have any picture to share on the cover of the book yet. Maybe I will update it on this same page when I have it. Till the next update!

Real Property Gain Tax in 2013

This is an update from my blog post in 2011 about the Real Property Gain Tax (RPGT) in Malaysia for the current year 2012. You can go to the blog post here. That blog post explains about how does the Real Property Gain Tax in Malaysia works.

It was announced in Budget 2013 that the change for Real Property Gain Tax in Malaysia for 2013 is the addition of 5% to the current 10% RPGT for the sale of property which was bought 2 years from the date of the Sale & Purchase Agreement and the addition of 5% to the current 5% RPGT for the sale of property which was bought between 2 years and 5 years from the date of the Sale & Purchase Agreement. On the 6th year, there will be no Real Property Gain Tax levied on the sale.

As such, here is the rate which will be in force from 1st January 2013 :

Sale of property between 0 to 2 years of purchase : 15% RPGT

Sale of property between 2 to 5 years of purchase : 10% RPGT

Sale of property after 5 years of purchase : 0% RPGT

As I had advised in the blog post about RPGT in 2011, adjust your property investment accordingly.

Property Manager : Regulated Professionals?

In my new book, 40 More Questions You Should Ask Your Lawyer Before Buying A Residential Property in Malaysia, I tried to tackle the issue of living in strata developments in most part of the book more than anything else. The process and the dynamic of living in strata developments are a different kettle of fish than living in landed properties. It all comes down to how does the housing developer of a strata development handles the process of getting the individual strata titles. As this process is being handled, the management of the strata property is also a matter which can elevate the status of a housing developer or can be a bane to it. 

The three stages of managing a strata property starts the moment vacant possessions are passed to the purchasers. In the first year from that date, the management will fall on the housing developer. Upon the anniversary of one year from the date of the passing of the vacant possessions, the housing developer must passed the management of the strata development to the Joint Management Body consisting of all the owners, who were once purchasers of the strata development together with the housing developer. The Joint Management Body will then formed the Joint Management Committee who will be the council which will manage the strata development. When the strata properties in the strata development have been issued with individual strata titles, that is the moment the management will pass to the Management Corporation which is the owners in the strata development, managing the strata development all by themselves.

It may seem easy to manage a strata development if not for the intricacies involved in pleasing every each property ow within it. That is why property managements are needed in ensuring strata developments are properly managed. That is why the Building and Common Property (Maintenance and Management) Act 2007 which governs the conducts of Joint Management Body/Committee allows for the appointment of agents to help manage the common property and the strata development as a whole. The Strata Titles Act 1974 also recognised the need for property managers and allows it if the Management Corporation decided to do so. This Building and Common Property (Maintenance and Management) Act 2007 and the Strata Titles Act 1974 actually works hand in hand with the Valuers, Appraisers and Estate Agents Act 1981. This Act which is also known as Act 242 helps housing developers, Joint Management Bodies and Management Corporations, together with the owners of strata developments, choose the best property management agent for their strata development. Currently, Act 242 is in the midst of being amended. Let us look at the amendment to Act 242 in detail. The excerpt below is from a press release by Malaysian Institute of Professional Property Manager.

The Valuers, Appraisers and Estate Agents Act 1981 provides legislative regulatory control by the Board of Valuers, Appraisers & Estate Agents Malaysia (the Board) on a property manager, be it a person, firm or company, who is carrying out property management services for a fee. In order to improve the regularization of the professional property management practice, the Board formulated and implemented the Property Management Standards on 1 June 2010. Besides its clear and timely objective to safeguard the interest of the public from unscrupulous and illegal property managers, it is also to tighten the corporate governance legislative framework which gives the profession a code of conduct within which they are allowed to operate. The provisions regulate the professional ethics; and more importantly the fiduciary duties and obligations of property managers.

While it follows that property managers are governed by the above guidelines, the rapid progress in the property and building industry has given birth to a breed of unlicensed property managers that has been taking the profession for granted. Operating without any license, it could safely be said that a majority of this group are also operating without any background, skills or experience in the field. This in turn has created a lot of problems to home owners. On a regular basis, we would read or watch on the local news, incidents of misconduct or sheer negligence on the part of unlicensed property managers who have failed to perform their duties, and the affected home owners are left with no recourse on liability. The proposed amendment is set to rectify this problem - to further protect the public’s interest, particularly its physical and financial well being. 

Professional property management practice is a specialized profession involving specialized training, knowledge and skills on subjects which include but not limited to, building maintenance, facilities and services management, financial management, property laws and insurance management. Every professional in property management practice for a fee must hold a professional degree in Property Management or Real Estate Management and must be duly registered by the Board. Valuers, who are trained in the art and science of property management which incorporates valuation, land economics and other skills, are first and foremost qualified property managers having obtained their degree in Estate Management or Property Management. After obtaining these degrees, registrants will have to undergo two years of training and pass a Test of Professional Competence. Further, continuous professional development of ten hours per annum must be exhausted in order to remain registered which also makes them eligible for Professional Indemnity Insurance. Anyone who fulfills the above requirements is rendered fit to offer services relating to real estate which include property management, estate agency, consultancy and valuation.

The proposed amendments to Act 242, amongst others, provides the proposed opening of a Register of Property Managers under the Act, to encourage all unlicensed property managers, under certain criteria, to register with the Board ensuring proper control. Whether they are named managing agents, building managers or valuers, if they are offering the services of a property manager for a fee, they must be registered.

The question of ‘monopoly’ and that ‘the opening of the Register is inconsistent with Competition Act, 2010’ should never have been raised here. As in every professional career that requires the knowledge of a core discipline and the need to be registered for professional practice, such as architects, engineers, doctors or lawyers, it is this same spirit that is put forward by the initiative to amend Act 242. Would you also say that the law which requires all lawyers to be registered and licensed has created a monopoly in the profession among licensed lawyers? If you would not risk your life on an unlicensed lawyer (or any other professionals who are in charge to safeguard and protect the public’s well being), why would you risk your life on an unlicensed property manager?

It is very important to note that registered property managers who are found to be negligent are subject to disciplinary actions under the Act and may even face disbarment from practicing – which will make the licensed property managers more responsible, failing which they might be in danger of losing their license and will eventually, be out of business. They can also be expected to comply with all the laws attached to the profession, as well as their fiduciary duties, such as providing audited accounts for public viewing which is one of home owner’s basic rights. Having said that, it is to be emphasized that building owners have all the right to manage their own properties, and Joint Management Bodies (JMBs), Management Corporations (MCs) and shopping centre owners can manage their own buildings or hire a registered property manager of their choice. The Act 242 only applies to those who practise property management and offering services as a property manager for a fee.

Another misconception is that the fee involved in appointing a licensed property manager is expensive. Contrary to what was said, the minimum management fee payable to a registered property manager is in fact, RM50 per holding per month, and not per unit. This has been clearly defined in the Local Government Act for subdivided buildings as “the Common Property and any parcel thereof” – which clearly provides that the minimum fee is RM50 per common property. To say that the management fee is RM50 per unit is not only wrong, but disregarding the fact that property managers are not managing individual strata units but only the common property.

It is a fact that property managers not registered under the Act will face difficulty obtaining indemnity insurance cover. Even if they do obtain it, if something goes wrong and a claim is filed, the insurance company may deny compensation on the grounds that the property managers are not legitimate, simply because they are not registered with the Board. The importance of an indemnity cover cannot be stressed enough. The basic terms and conditions of a Management Agreement between a Joint Management Body or Management Corporation and the property manager must provide indemnity cover because the two parties will eventually be exposed to risk if the companies or people they entrust their duties to are negligent or reckless in performing their duties. Taking the coverage will also be of comfort to the individual property manager as he will not have to suffer in his personal capacity in the event that he is sued for something outside his control. In this, the benefit works for both home owners and the licensed property managers themselves.

The task of a property manager is not simply “administrative” in nature. It requires clear judgment, immediate reactions to complaints, good communication skill, trustworthiness, ethics and a lot of other skills, values and competencies which comes through education, training and experience. A good property manager is expected to manage properties under its portfolio as if it were his own, paying a great deal of attention to every management detail, not limited to just the physical asset. In no way is the proposed amendment denying the fact that there are unlicensed managing agents out there who are absolutely competent and capable of performing their duties. What the Board is submitting is that, one may continue to practise as a professional property manager as long as one is registered under the Act so that their duties in managing their strata estates can be made clearer - ensuring the quality and professionalism of services rendered to the public at large is maintained at the highest level. In short, the amendment of the Act 242 ensures corporate governance, transparency and protection of the public.

Let us hope that the proposed amendment which will be tabled at the Parliament very soon will help raise the standard of property managers and make them into a regulated professional body like the other well-known professionals such as lawyers, doctors and engineers with guidelines and professional indemnity insurance.