BNM Publishes Consultation on Consumer Credit Act in Malaysia

This public consultation is the first of a two-part consultation. It provides an overview of the current landscape of the consumer credit industry in Malaysia, its challenges, and proposed reforms to better protect individuals and small businesses in their dealings with credit providers and credit service providers. The reforms will be implemented in phases under a proposed multi-year program to deliver consistent standards of protection for credit consumers and support the orderly development of the credit industry in Malaysia. The Consumer Credit Act seeks to provide a comprehensive framework for regulating the conduct of entities carrying out the business of providing credit or credit services to consumers, with an immediate focus on entities that are not currently subject to direct regulation by any authority; such entities include but are not limited to “Buy Now Pay Later” providers, leasing and factoring companies, impaired loan buyers, and debt collection agencies.

The CCOB Task Force is seeking feedback on the proposed regulatory and authorization framework as well as areas that will be addressed in the legislation to promote high standards of professionalism and fair conduct of credit providers and credit service providers. This will be followed by Part 2 of the consultation paper, which is to be issued in the fourth quarter of 2022 and will outline further details on the authorization framework and the scope and focus of requirements and standards that will apply to credit providers and credit service providers.

The transformation of the consumer credit regulatory landscape will be completed in phases. In its early stage as the competent authority, the CCOB will regulate all consumer credit activities which are currently unregulated. This will be followed by a gradual transfer of responsibilities for conduct regulation from the existing Regulatory and Supervisory Authorities (RSAs) to CCOB. The Consumer Credit Act will also facilitate Islamic credit business by non-bank credit providers by including provisions to ensure that such credit providers and its product offerings comply with Shariah principles. In Phase 2 (by 2025), the regulatory functions in respect of consumer credit activities under KPDNHEP (Ministry of Domestic Trade and Consumer Affairs) and KPKT (Ministry of Housing and Local Government) will be transferred to CCOB, while BNM, SC (Securities Commission Malaysia), and SKM (Malaysia Co-operative Societies Commission of Malaysia) will continue to serve as the RSAs for the entities under their respective purview. In Phase 3 (after 2030), further enhancements to existing structures for the conduct regulation of all financial firms in Malaysia will be considered. This may include proposals that draw from the experience of the ‘"twin peaks" approach to financial regulation.

Related Link: Press Release

Keywords: Asia Pacific, Malaysia, Banking, Credit Risk, Consumer Credit Act, Buy Now Pay Later, CCA, CCOB, Governance, Lending, BNM