No....it's exploiting the loop hole of banks by declaring their business wrongly to obtain the merchant terminal.
For instance, they will declare the service they provide as water dispensary company (example).
So to the bank, they thought they are dealing with a legitimate company selling water dispensary, but in actual fact the company is not doing that business.
So you figure out whether or not that is legal.

No....the news and the agency here is different.
Like I explained, the business entity for carrying out those so called EPP conversion is not legitimate. It exploits the loophole of banks.
Whereas in this news article, it's basically referring to AKPK http://www.akpk.org.my/ which helps only those certified really in debt trouble.
But there's sacrifices whereby this government agency would help convert all your loans outstanding into term loan with minimal interest. But within those periods, one cannot get another loan until one pays off all his debt.

Whereas the rampant modus operandi which you provided in your first post is not related to any legitimate financial institution. It is like what I explained. A falsely declared company to get the merchant terminals and help you swipe your card and convert it into EPP.
Say you owe the bank RM5k. You'll need another card or the existing card must have another RM5k limit not used.
This company would swipe the RM5k and convert it into EPP and they would hand over to you the RM5k (usually they would charge you some fees, so you might not be getting the full RM5k).
Than, you're suppose to use this RM5k cash to go pay your debt the RM5k that you owed.
Now you're left with another RM5k debt which instead of the credit card statment billing you RM5k in total every month, you'll pay the installment amount converted. Get the drift!?

But like I explained, the company doing so is not legitimate as they have falsely declared their services to the banks and also to SSM.
Banks when find out usually wouldn't do much towards the said company. They would just terminate the merchant terminal services the rented out. But some would go to the extreme to go file a case against the said company for fraud and hand over to SSM to do the investigating instead of getting their own hands dirty.

The best way is still use what you can afford.
End of story!

@cms.malaysia
You should be lucky that your company's merchant is not being closed down yet.
FYI, the banks had taken action against many of this company.
Also, pls listed down what merchant terminal your company has. I'll bet you only have local bank's merchant terminal.

No, banks wouldn't waste the effort of sue-ing the merchant as it would eventually involve the mass consumers as witnesses and also wasting money as these business can open and close any other day.
The most they would do is to hand the company complain over to SSM and let them do the rest as it's falsely declaring their business under SSM.