The fiduciary is a legal term that regulates the transfer of rights over an item or object. This term may sound quite foreign, but this term is widely used when you apply for loans to non-bank financial institutions and banks in Indonesia.
For example, for applying for loans related to mortgages, capital loans, motor vehicle loans, and so on. To make it easier for you to understand what fiduciary is, its legal basis, elements of guarantee, the object of guarantee, right of execution, and the difference between it and pawning, let's see more here.
1. Definition of Fiduciary
Based on Law No. 42 of 1999, what is meant by the fiduciary is the transfer of ownership rights to an object on the basis of trust provided that the object whose ownership is transferred remains in the control of the owner of the object.
Meanwhile, according to the Financial Services Authority (OJK), a fiduciary is defined as the binding of movable property as collateral for credit, the collateral is controlled by the debtor, but the ownership is handed over on the basis of trust to the creditor.
From the two definitions above, it can be concluded that fiduciary is the activity of transferring ownership of goods to another party, in the context of a loan, namely to creditors (lenders) as collateral assets. However, the debtor as the owner of the goods still has the right to use the collateralized goods.
For example, you borrow some funds for business capital from a finance company. The loan you choose is in the form of a motorbike BPKB guarantee loan. In practice, the ownership rights of the motorbike have been transferred to the creditor because you pledged the BPKB of your motorbike, but you can still use the motorbike for daily mobility. The right to own the motorbike will fully return to you if the existing loan has been completed or has been successfully repaid.
Apart from loan funds, another example that we most often encounter in everyday life is motorbike loans. Even if the motorbike is in your name, the creditor is still the owner of the motorbike until you pay off the credit. So, if you fail to pay, the lender has the right to take your motorbike at any time in accordance with applicable legality.
2. Basic Fiduciary Law
The fiduciary legal basis is contained in Law no. 42 of 1999. In this law, it has been determined which parties are included in the Fiduciary Giver and Recipient.
1. A fiduciary giver is an individual or corporation who owns objects that are the object of a Fiduciary Guarantee. In the context of a loan, this party is referred to as the creditor or lender.
2. Fiduciary recipients are individuals or corporations who have receivables whose payments are guaranteed by a Fiduciary Collateral. In the context of a loan, this party is referred to as a debtor or loan recipient and will obtain rights to the goods he guarantees until the agreed-upon agreement is fulfilled. For example, fulfilling obligations to pay off installments or loans.
The objects that can be used as fiduciary guarantees according to the applicable law are movable objects, both tangible and intangible, as well as immovable objects. Such as motorized vehicles, houses, land, and so forth.
So that neither party is harmed, a fiduciary agreement must be drawn up at a notary with several clauses covering the term of the agreement, the amount of credit to be paid, the method of payment, and the sanctions that apply if one of the parties violates the agreement made.
3. Elements of Fiduciary Guarantee
Elements of fiduciary guarantees are important terms that exist in fiduciary. This element consists of 5 main things as follows.
3.1. Debtor
People or institutions borrow money or make credit for goods.
3.2. Creditors
The party that provides the loan with an agreement in the form of guarantees and other terms that have been mutually agreed upon with the debtor.
3.3. Object of Collateral
Assets pledged as collateral for debt repayment in accordance with the agreement that has been made.
3.4. Deed of Fiduciary Guarantee
Documents containing fiduciary guarantees between debtors and creditors. This deed is drawn up by a notary and legalized by an authorized institution.
3.5. Fiduciary Guarantee Law
The rules governing fiduciary guarantees in Indonesia, specifically Law No. 49 of 1999.
4. Fiduciary Guarantee Object
Assets used to guarantee loans or debts are referred to as fiduciary objects. Fiduciary guarantee objects are tangible or intangible objects that fall into the following categories:
1. Motor vehicles: cars and motorbikes.
2. Land and buildings: houses, buildings, shop houses, apartments, agricultural land.
3. Machinery and equipment: industrial machinery, office equipment.
4. Bonds and stocks: government bonds, company shares.
5. Bank accounts: savings, deposits.
6. Other securities: debt securities, tax certificates.
7. Goods inventory: finished goods, merchandise.
Image Source: Pexels/Karolina Grabowska
In addition, fiduciary objects must be items that can be identified and clearly owned and can be accounted for. Objects such as copyrights, intellectual property rights, and the like cannot be categorized as objects of fiduciary guarantees.
5. Fiduciary Execution Rights
The fiduciary right of execution is the act of taking goods by the creditor because the debtor is unable to pay off the installments or loan (bad credit). This right of execution cannot be exercised haphazardly, it must be in accordance with the procedures and rules that apply.
First, the creditor will send a warning letter. If there is no response to the first letter, a second warning letter will be sent. If the letter does not receive a response, the creditor may send a power of attorney to the relevant creditor.
Only after that, the creditor can take full rights to the goods with a note that he must attach proof of delivery of warning letters 1 and 2, power of attorney for execution, and fiduciary certificates to avoid misunderstandings.
Also Read: Non-Performing Loan: Definition, Causes, and How to Overcome
6. Difference between Fiduciary and Pawn
Reporting from some reliable literature, the basic differences between pawning and fiduciary are as follows.
6.1. Legal Basis
Pawning activities are regulated in Articles 1.150 to Article 1.160 of the Civil Code (Code of Civil Code). While fiduciary is regulated in Law No. 42 of 1999 concerning Fiduciary Guarantees and Government Regulation No. 86 of 2000 concerning Procedures for Registration of Fiduciary Guarantees and Fees for Making Fiduciary Guarantee Deeds.
6.2. Rights
Pawnee and Fiduciary:
- The pawnbroker has the right to control the object pledged but does not have the right to own the object pledged. Meanwhile, as a fiduciary recipient, he has ownership rights over objects that are used as fiduciary objects, but these objects are not physically under his control.
- If the debtor is in default and the object being used as collateral is to be sold, the pawnbroker does not need a court order and there is no need for a bailiff. Meanwhile, as a fiduciary recipient in his activities to sell objects used as collateral, requires a decision from the Court that has permanent legal force.
- The pawnbroker can hold the object used as pledge collateral, if the principal debt, interest, and other costs have not been repaid during a certain agreement period by the pawnbroker. In addition, the debtor does not have the power to demand the return of mortgaged objects. Meanwhile, as fiduciary recipients, they will obtain rights to objects that are used as objects of fiduciary guarantees if execution is carried out.
Pledge and Fiduciary:
- The pawn giver still has ownership rights to the object that is used as collateral for the pledge. Meanwhile, the fiduciary giver still has the power of the object that is used as the object of fiduciary guarantees.
- In addition, the fiduciary giver can use, combine, mix or transfer objects or results from objects that are objects of fiduciary guarantees, or collect or compromise debts if the fiduciary recipient agrees.
6.3. Prohibition
- The pawnbroker or creditor is not allowed to own or become the owner of the pawned object.
- Meanwhile, fiduciary givers are prohibited from re-educating objects that are objects of registered fiduciary guarantees. In addition, fiduciary givers are prohibited from transferring, pawning, or renting to other parties objects that are objects of fiduciary guarantees that are not inventory objects, except with prior written approval from the Fiduciary Recipient.
6.4. Sanctions
- The Civil Code is not regulated regarding sanctions for the Parties (Pledge giver and Recipient).
- The fiduciary giver will receive sanctions if he intentionally diverts, mortgages, or leases objects that are objects of fiduciary guarantees which are carried out without the written consent of the Fiduciary Recipient.
- Any person who deliberately falsifies modifies, removes, or in any way provides misleading information is known by one of the parties listed in the fiduciary guarantee agreement, will still receive sanctions.
Also Read: What is Mortgage: Definition, Legal Basis, Types, and Other Provisions
7. Tips on Avoiding BFI Fiduciary Execution
As a debtor, of course, we don't want the assets we guarantee to be executed or taken away due to bad credit or default. To prevent this from happening, you can follow some of the following anti-default tips.
7.1. Apply for a loan according to your ability
Avoid applying for a loan with a nominal that is too large, making it difficult for you later.
7.2. Create A Payment Reminder
There are times when the various busy lives that we live can make us forget to carry out our obligations, one of which is paying installments. To prevent this from happening and to avoid fines, you can create reminders through applications such as the calendar on your phone.
7.3. Create A Monthly Budget
The ideal amount of debt does not exceed 30% of your monthly income. By making a monthly budget, you can monitor spending transactions every month, so you can continue to commit to always paying the existing installments.
7.4. Choose A Secure Financing Company
Choosing a safe finance company is one of the ways you have to do to avoid default. This is because official finance companies have good transparency. You can find out the nominal loan amount, interest rates, and applicable penalties. Everything is calculated according to your ability in terms of finances.
One of the most trusted financing companies that have been established since 1982 and spread throughout Indonesia is BFI Finance. You can make your dreams come true with BFI Finance, from business capital, and educational expenses, to lifestyle.
BFI Finance is a company that provides multi-purpose loans with guarantees for motorbike bpkb, car bpkb, and house or shophouse certificates