Resolving Legal Disputes between Banks and Customers over Credit Default without Collateral through Banking Mediation & Financial Services Authority

Abstract

Unsecured credit defaults have become a persistent issue in Indonesia, resulting in significant losses for banks and financial strain for customers. In Indonesia, regulations relating to the protection of financial consumers have been in place for a long time. The development of laws and regulations governing financial dispute resolution began in the 1990s. However, the latest OJK Regulation, No. 1/POJK.07/2014, has sparked much debate. This regulation is considered ineffective due to normative defects, such as limited enforcement mechanisms, reducing or eliminating the responsibility of mediators or officials involved, and marginalising the rights of customers, resulting in low resolution rates. The purpose of this article is to see how effectively the OJK Regulation No. 1/POJK.07/2014 resolves unsecured credit disputes. The results show that unsecured credit is subject to declarative principles as financial rights arise automatically after the agreement. The frequent alternation of resolution mechanisms gives the impression that lawmakers do not have a history of financial consumer protection law. The purpose of the law is to ensure not only justice, but also compliance with the law. All laws will become ineffective if not enforced. So it is not just about the protection of citizens, it is also about citizens' compliance with the law. OJK Regulation No. 1/POJK.07/2014 contributes only to the protection of the personal rights of citizens; it does not guarantee the protection of the public rights of citizens.