The Consumer Credit Act (CCA) has been passed by the Dewan Rakyat, marking a major step toward improving how credit is offered and managed in Malaysia. The Act introduces a new legal framework to strengthen consumer protection, promote transparency, and regulate non-bank credit providers.

A key part of the reform is the creation of the Consumer Credit Oversight Board (CCOB), which will be responsible for licensing and supervising a range of credit businesses. This includes Buy Now Pay Later (BNPL) providers, leasing companies, and debt collection agencies.

Below are the key protections the CCA is set to introduce:

Regulation for BNPL and Non-Bank Credit Providers

The CCA brings a broad group of credit-related businesses into the regulatory framework. This includes BNPL operators, leasing and factoring companies, debt collection agencies, companies that purchase impaired loans, and debt management service providers.

Once the Act comes into force, these businesses must be licensed and operate under consistent rules. For consumers, this means more reliable standards and clearer options for recourse when something goes wrong.

Stricter Standards for Debt Collection

Debt collection practices have long been a source of concern for borrowers. Under the CCA, only registered or licensed parties can collect debts, and they must be properly identified.

The law prohibits behaviour that includes threats, harassment, or public shaming. Credit providers remain responsible for the actions of the collectors they engage. If a borrower experiences misconduct, they can lodge a complaint with the original lender, who is obligated to address it.

Transparent Loan Terms and Marketing

Lenders must present credit terms in language that is clear and easy to understand. This includes the interest or profit rate, all fees and charges, the duration of the loan, and the total repayment amount.

Promotional materials must also be accurate. Borrowers should have access to all key information before agreeing to any credit product, with no misleading or hidden terms.

Fair Charges and Early Repayment Rights

The Act limits excessive fees and sets boundaries on how late payment charges can be applied. These charges must serve only to encourage timely payments and cannot be used as an extra profit source. Interest cannot be charged on unpaid late fees.

Borrowers have the legal right to make early repayments, whether in full or in part. If any early settlement fee is charged, it must be fair and not discourage borrowers from paying off their loans ahead of schedule.

A Fairer Interest Calculation for Hire Purchase Loans

The CCA prohibits the use of the Rule of 78 in hire purchase agreements, which includes most car loans. This method front-loaded interest payments, meaning borrowers who repaid early still ended up paying a large portion of interest.

With the new law, lenders must use the reducing balance method instead. This means interest is calculated based on the remaining loan balance, resulting in a fairer outcome. Lenders must also disclose the Effective Interest Rate, giving borrowers a clearer understanding of the true cost of the loan.

Mandatory Affordability Assessments

Before approving a loan or increasing a borrower’s credit limit, lenders must assess whether the borrower can afford the repayments. This includes reviewing income, current debts, and repayment capacity.

The goal is to prevent borrowers from taking on more debt than they can manage and to reduce the risk of long-term financial hardship.

Clear Rules Against Unfair Practices

The CCA outlines what constitutes misleading or unfair conduct by credit providers. This includes giving false information, making promises that cannot be kept, applying pressure during sales, or charging for services that were not requested.

These actions are now considered offences and can result in fines, imprisonment, or both. The Act ensures that borrowers are protected from being misled or taken advantage of during the credit application process.

Support for Borrowers Facing Financial Hardship

The law recognises that borrowers may sometimes be unable to meet repayments due to events beyond their control. This includes situations such as illness, job loss, natural disasters, or the death of a family’s main income earner.

In such cases, credit providers must provide support. They are required to assign a contact point, assess the situation, and offer an alternative repayment plan. Legal proceedings cannot begin while the case is being reviewed.

Stronger Data Protection and Easier Complaint Resolution

All credit providers must comply with the Personal Data Protection Act to ensure the security and privacy of borrowers’ information. In addition, each provider must have a clear process for handling complaints.

To streamline this, the CCOB will introduce a digital platform that allows borrowers to submit complaints in one place. This system will route each case to the appropriate authority, helping to resolve issues more efficiently.

What Happens Next

The Consumer Credit Act lays the foundation for a more transparent, accountable, and fair credit system in Malaysia. Once in effect, it will provide consistent protections across bank and non-bank credit services, strengthen oversight, and help borrowers make better-informed financial decisions.

At the time of writing, the Act has been passed by Parliament but is not yet in force. Its provisions will only apply after the Minister of Finance announces the enforcement date through a gazette notification. The rollout of the Consumer Credit Oversight Board (CCOB) will also happen in phases.

For now, the Act signals a long-awaited shift toward stronger borrower protection. As the implementation begins, both consumers and credit providers should prepare for a more regulated and transparent lending environment.

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• TAGS:
• BNPL
• Borrowers
• CCA
• CCOB
• Consumer Credit Act
• Consumer Credit Oversight Board
• Debt Collection
• Fair Charges
• Loan Terms
• Non-Bank Credit Providers