6th July 2022 - 3 min read
Bank Negara Malaysia (BNM) has urged consumers to exercise caution when using buy-now-pay-later (BNPL) schemes, ensuring that they do not overspend while making purchases. Additionally, the central bank will also work with relevant agencies to address this concern, including through public education.
“Although BNPL schemes typically allow customers to make payments for purchases in instalments at zero interest, consumers need to be aware that there may be other charges levied (e.g. processing fees and late payment fees),” BNM said. It also added that the total charges by some BNPL providers may even be higher than the charges imposed by traditional lenders for products such as credit cards.
As such, the central bank advised BNPL users to check the terms and conditions of the schemes, particularly the applicable fees and charges. Consumers should also always strive to pay their instalments in full and on time to avoid penalties. This is also to ensure that their debts are well-managed.
To note, the BNPL industry has seen an exponential growth during the outbreak of Covid-19 as Malaysians were forced to go online for their purchases and needs. In 2022 alone, it recorded an estimated transaction volume of over RM2 billion. Despite that, such schemes are not yet properly regulated; BNPL schemes offered by non-bank operators currently do not fall within the purview of BNM or any other regulatory body.
In light of this, BNM stated that the Ministry of Finance (MOF) and the Securities Commission (SC) are currently leading inter-agency efforts to enact the Consumer Credit Act (CCA) by this year. This will eventually lead to the establishment of the Consumer Credit Oversight Board (CCOB).
“The CCOB will eventually serve as the sole conduct authority for all consumer credit activities, starting with those offered by credit providers that are currently unregulated by any authority, such as BNPL schemes offered by non-bank operators,” BNM explained.
The central bank also remarked that the enactment of the CCA will also mean that BNPL providers – especially non-bank BNPL providers – will be subject to regulatory requirements. These include abiding by responsible lending practices that deter providers from extending an offer to customers who are unable to meet their debt obligations. “Such providers will also be subject to expectations on consumer protection, risk management, and shariah compliance,” it said.
“For BNPL schemes offered by, or in partnership with banking institutions, the banking institutions are expected to observe practices that are consistent with the existing responsible lending requirements,” BNM also commented.
The CCA was originally set as part of the strategic outcomes under BNM’s Business Plan 2018-2020, and was eventually included under Budget 2021. Following that, BNM said that it is looking to pass the CCA in 2022. Meanwhile, MOF shared earlier in March this year that it is working with both BNM and SC to formulate a credit regulation framework by this year. The framework is expected to be implemented with the enactment of the CCA.
(Source: Malay Mail)
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