THE government is in the process of formulating stricter regulations under the Consumer Credit Act (CCA) in response to the surging popularity of innovative credit products like Buy-Now-Pay-Later (BNPL) services.
These measures are aimed at ensuring consumer protection and responsible lending practices, particularly targeting non-bank entities that currently operate without supervision.
According to Bank Negara Malaysia (BNM) financial inclusion department director Nor Rafidz Nazri, the government through BNM will establish an authoritative body to oversee and regulate entities offering such credit products.
“To further strengthen consumer credit protection in Malaysia, the government is also drafting the Consumer Credit Act.
“A consumer credit monitoring task force led by the Finance Ministry (MOF) and two agencies, namely BNM and the Securities Commission Malaysia, are responsible for providing a comprehensive framework for this,” Berita Harian quoted him as saying.
“It aims to regulate the practices of non-bank entities providing credit services to consumers, in addition to overseeing new credit product providers such as the BNPL.”
This initiative comes amid concerns raised by organisations and consumer associations regarding the growing number of young individuals some as young as 19, burdened with debt, often incurred through credit agencies for purchases such as motorcycles.
Under the BNPL model, consumers are provided with online credit platforms allowing for monthly instalment repayments without interest or loan limits. Unlike traditional bank loans, these platforms typically operate outside the country and do not require borrowers to provide guarantors.
Moreover, Nor Rafidz noted the importance of cooperation between various ministries including the Domestic Trade and Consumer Affairs Ministry and the Housing and Local Government Ministry, in drafting the legislation to safeguard consumer interests.
“BNM is constantly monitoring and ensuring that financial institutions took responsible steps when offering financial services and products.
“Any market practices that are unfair and can cause significant harm to consumers may be subject to supervision and enforcement actions by BNM,” he added.
In addition to regulatory efforts, the Financial Education Network (Fen) jointly chaired by BNM and the Securities Commission Malaysia is actively promoting financial literacy and prudent financial management practices.
“In offering financing products, all financial institutions regulated by BNM are required to adhere to prudent financing requirements to ensure borrowers had sufficient financial capacity for daily expenses.
“It is also to protect consumers from excessive debt burdens, thus requiring financial institutions to conduct affordability assessments and comply with prudent debt service ratios so that borrowers could repay the financing throughout the financing period,” he further added.
Furthermore, initiatives such as the Fen Proactive Programme which includes financial education modules in higher education institutions and online financial education courses aim to empower Malaysians especially the youth with essential financial knowledge.
Throughout 2021 and 2022, Fen conducted over 500 financial education initiatives, engaging more than 11 million individuals across all age groups and income levels.
The recent Financial Literacy Month in 2023 saw significant participation with over 6.3 million interactions and assistance provided to more than 31,000 citizens including university students. – April 17, 2024
