The country's second largest banking group today denied that it's pre-approved loan scheme worked in the same manner as those offered by illegal money lenders (Ah Long) - including the high interest rates.

Instead, CIMB said its scheme - launched in January 2005 - was in place to help provide small loans for those who required it.

"This is not another big-time Ah Long scheme," said CIMB's corporate communication head Affendi Hamid when contacted today.

"This is an innovative service to obtain loan rather than borrowing from an illegal money lender."

"We charge based on a reducing interest rate. Other banks charge a flat rate," he added.

The scheme - called CIMB Xpress Cash - offered a pre-approved RM5,000 personal loan to selected customers at an interest rate of three percent per month at a reducing balance on a daily basis.

Through this scheme, customers can opt to pay monthly installments in a period of 24 months (with a monthly installment of RM296), 36 months ( RM230 per month) or 48 months (RM198 per month). (See chart)

Affendi added that the scheme was in place to assist people without stable income or capital to start a business.

Fast cash without hassles

Meanwhile the person in charge of the scheme Aaron Loo said the bank would not act like Ah Longs in recovering the money from defaulting customers.

He also said that CIMB would not resort to physical actions against loan defaulters.

"We just call (to remind them), send legal letters from our lawyers or blacklist them," he said.

Loo also declined to reveal the number offer letters sent out to the bank's customers as it was "market-sensitive information". However it is learnt that about 38,000 customers have been offered this service.

In the offer letter - titled 'Fast cash without hassles, only a tick and a signature away' - a potential customer is told that he/she is a "selected few valued customer" to whom the personal loan is made available.

When contacted for comment, Federation of Malaysian Consumers Association advisor Hamdan Adnan said the interest rate charged by the bank for the RM5,000 loan was too high.

Culture of debt

And, more worryingly, he added, the easy loan scheme would only encourage culture of debt in the society.

"Bank Negara needs to do something about this scheme," he told malaysiakini.

Adnan was also of the opinion that the bank should not be taking advantage of its consumers who are looking at other alternatives from being caught paying high interest rates to loan sharks.

"This scheme will be better if CIMB charges a reasonable interest rate," he said.

The president of the Consumers Association Of Subang and Shah Alam, Jacob George welcomed CIMB's express loan scheme, but had similar reservations over the high interest rates.

"We've spoken to senior CIMB officers in Shah Alam to readjust the interest. From what we understand, they are still fine tuning the scheme," he said, when contacted.

Jacob said that the consumer association would forward an official request once they have finished compiling feedback from the consumers.