I was caught with my pants down recently when I bought a new Honda car and took a bank loan from a local reputable bank to finance the purchase of the car.

Everything went smoothly and I was driving the car for three months before I decided to settle the vehicle loan early as I didn’t want to have to make monthly trips to the bank concerned to make my payments and I have little other business with the said bank.

I knew I would have to pay a penalty for early settlement of the loan and the amount of rebate that I was entitled to was calculated based on a formula set out in the Loan Agreement.

Unfortunately, I was informed by the bank officer who confidently advised me that on top of the penalty sum, I would also have to also pay an additional ‘early settlement charge’ of RM600.

As if this isn’t yet the last straw, I was slapped with another charge of RM118 – this being for ‘documentation charges’ which although not mentioned in the Loan Agreement, is charged to my account and I am required to settle this before the Release Letter and the vehicle’s Registration Card is handed over to me.

I would like to know from the parties concerned including the banks and Bank Negara whether banks are entitled to charge vehicle loan borrowers the ‘early settlement’ as well as the ‘documentation fees’ charges which I was told to pay.

The brash bank officer even had the cheek to tell me that she has the authority to reduce the ‘early settlement’ penalty and proceeded to reduce the amount to RM300 with a stroke of her pen right under my very eyes!

I was also informed that the additional RM600 that was imposed upon me for early settlement of the car loan went fully to settling a ‘entitlement levy’ which car dealers/outlets charge the banks for giving them business.

Now why should a car buyer need to ‘cover’ this ‘levy’? Is it right for the banks to pay the car dealers/outlets this ‘levy’ in the first case?

No wonder car prices are exorbitantly high even though we are experiencing recession in our country and economy is projected to shrink by 3.3% this year.