The Consumer Credit Act 2025 has been enacted but has yet to come into force, marking a transition period before buy now, pay later providers and other non bank lenders fall under a single statutory regulator for the first time.

Once implementation begins later this year, the new framework will formalise oversight of consumer credit products that have grown rapidly in everyday use, particularly among younger and lower income Malaysians. Deputy Finance Minister Liew Chin Tong said the Act is intended to strengthen consumer protection and promote more responsible lending across the non bank credit industry.

Consumer Credit Act 2025 Formalises Non Bank Credit Regulation

The Consumer Credit Act 2025, also known as Act 873, establishes a comprehensive regulatory framework for non bank credit providers that were previously not directly supervised by any single authority.

This includes buy now, pay later operators, which have expanded quickly in recent years as part of everyday spending habits. According to Liew, the objective of the Act is to protect credit consumers while ensuring that lending practices across the industry remain sustainable.

Although the legislation has been enacted, enforcement will begin only after the Act comes into force and the relevant regulatory structures are in place.

Household Debt Remains Elevated

As at the end of September 2025, Malaysia’s total household debt stood at RM1.69 trillion, equivalent to 84.9% of gross domestic product, reflecting the continued reliance on credit to support household spending.

Following the revision of the youth age definition to those aged 30 and below, household debt held by this group accounted for 7.8% of total household debt, amounting to RM132.4 billion.

Unsecured Debt Among Youths Shows Limited Improvement

Liew said unsecured debt among Malaysians under 30, which includes personal financing and credit card balances, recorded a slight decline over the period.

Unsecured youth debt eased from 8.1% in December 2024 to 8.0% by September 2025, with outstanding balances totalling RM10.6 billion. The median age of young borrowers holding unsecured debt was 27, indicating that exposure to such credit typically begins early in working life.

Buy Now, Pay Later Usage Continues To Expand

Buy now, pay later usage increased sharply in 2025, both in terms of transaction volume and total value.

A total of 243 million transactions were recorded during the year, amounting to RM21.3 billion. This represents a 66% increase in transaction volume and a 78% increase in value compared with 2024, when 146 million transactions worth RM12 billion were recorded.

Youths aged 30 and below accounted for around 40% of all buy now, pay later transactions. These services were most commonly used for everyday expenses such as food purchases, groceries, transport, and services, with an average transaction value of RM91.

Lower Income Groups Make Up Most Buy Now, Pay Later Users

A study by the Consumer Credit Oversight Board Task Force found that more than 70% of active buy now, pay later users came from the B40 income group.

Liew said this concentration highlights the importance of consumer protection, particularly for households with limited financial buffers and greater exposure to rising living costs.

As at 31 December 2025, total outstanding buy now, pay later loans stood at RM4.9 billion, representing about 0.3% of overall household debt. Overdue amounts totalled RM160.2 million, or 3.3% of outstanding balances, which Liew said indicates that buy now, pay later related debt does not currently pose a systemic risk.

Consumer Credit Commission To Oversee Enforcement

Under Act 873, a Consumer Credit Commission will be established as the regulator responsible for supervising the consumer credit industry once the Act comes into force.

The commission will have powers to monitor compliance, conduct investigations, take enforcement action, and impose penalties on credit providers that breach consumer protection requirements. Buy now, pay later providers will fall under this oversight framework as part of the phased implementation of the Act.

How The New Credit Rules Affect Everyday Spending

The Consumer Credit Act 2025 formalises oversight of credit products that have already become part of everyday spending, rather than introducing new forms of borrowing. For consumers, this means that instalment based payment options, particularly buy now, pay later services, will be subject to clearer and more consistent standards once enforcement begins.

While buy now, pay later borrowing currently makes up a small share of total household debt, the scale and frequency of usage show how easily small instalments can accumulate across multiple platforms. Clearer rules around lending practices and disclosures are intended to help ensure that repayment obligations remain aligned with consumers’ financial capacity.

The establishment of a dedicated Consumer Credit Commission also creates a single point of oversight for non bank lenders that were previously regulated in a fragmented way. Over time, this is expected to improve consistency across consumer credit products and reduce the risk of harmful borrowing patterns as access to alternative credit continues to expand.

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