For years, borrowers in Malaysia have been at a disadvantage when dealing with lenders. If you couldn’t pay, faced hidden fees, or got trapped in unfair terms, your options were limited and often expensive.

Malaysia’s Consumer Credit Act, passed in July 2025, changes that dynamic. The law gives borrowers real protection and puts consequences on lenders who break the rules. This is what the Act covers and how it affects your rights when you borrow money.

You’re Protected Whether You’re Borrowing RM500 Or RM500,000

All individual Malaysians get full protection under the Act with no loan amount cap. Small businesses borrowing up to RM500,000 are covered. Guaranteeing a loan for a family member or friend? You’re protected too, as long as you’re not doing it as a commercial activity.

The Act covers personal loans, car financing, pawnshops, moneylenders, and Buy Now Pay Later services. Before this law, many of these lenders operated in a grey zone where borrowers had little recourse when things went wrong.

How Does The Act Protect Me From Predatory Lending Practices?

Lenders must now run a Debt Service Ratio check before approving your application. This calculation shows how much of your income already goes to existing debts. If you’re spending most of your salary on loan repayments, banks can’t approve you for more credit under the new rules. The check prevents borrowers from taking on more debt than they can realistically manage.

Car loan interest is capped at 17% effective interest rate (EIR) per year maximum. The Rule of 78, that formula which made early car loan repayment nearly pointless, is banned completely. Pay off your loan early now, and you’ll save proper interest, not cents.

Late payment fees can’t compound anymore. Lenders can’t charge interest on top of late fees, so your debt won’t snowball the way it used to when you miss a payment.

What Happens if a Lender Violates My Rights Under the Consumer Credit Act?

Companies breaking the Consumer Credit Act face fines of up to RM5 million. Company directors can face prison time. In serious cases, regulators can remove directors from their positions and ban them from running companies for up to five years. The government can also revoke licences entirely.

If you’ve been charged unfair fees, regulators force lenders to refund those charges directly to you. If the lender refuses, the government sues them on your behalf and recovers your money. You don’t hire lawyers, you don’t pay legal fees. The government handles the legal action.

What Recourse Do I Have if I’m Charged Unfair Fees or Interest?

File a complaint about unfair charges and the Consumer Credit Commission investigates on your behalf. They can order the lender to return your money directly. If the lender ignores the order, the government takes legal action and recovers the money as though you’d won in court.

Hidden fees, excessive interest, or any rule broken in the Act get the same treatment. Before the Consumer Credit Act, getting your money back meant hiring lawyers and going to court, which most people couldn’t afford. The new system puts the government’s resources behind your complaint.

Does This Act Cover All Types of Loans or Just Specific Products?

Banks, licensed moneylenders, pawnbrokers, car finance companies, Buy Now Pay Later services, and debt collectors all follow the new rules. The immediate focus in Phase 1 (2025-2027) is on regulating sectors that had little to no regulation before: Buy Now Pay Later (BNPL), Factoring, Leasing, Debt Collection, and Impaired Loan Buyers.

Bank Negara Malaysia still oversees housing loans and credit cards from banks during Phase 1, but even those products must meet the Consumer Credit Act’s standards on top of existing banking rules. Existing government departments keep watching their sectors while the Consumer Credit Commission gets ready to take over full supervision.

It’s worth noting that Buy Now Pay Later services and debt collection agencies, which had essentially zero regulation before 2025, now face full government supervision.

How Do I File a Complaint if a Financial Institution Breaches the Act?

You’ll need the lender’s full name and contact details, a written explanation of what went wrong with dates and amounts, and copies of your loan agreement and receipts. File your complaint with the Consumer Credit Commission online or visit their offices across Malaysia.

Car loan complaints can also go through the Tribunal for Consumer Claims under the Ministry of Domestic Trade and Cost of Living, giving you an alternative avenue if you prefer.

Protections Apply Regardless of What Your Loan Agreement Says

The Consumer Credit Act applies to all covered lending arrangements, regardless of what your loan agreement says. This closes the loophole where lenders buried dodgy terms in contracts or cited foreign laws to avoid Malaysian regulations.

Companies breaking the rules face government investigation and forced refunds on your behalf. Fines up to RM5 million make lenders think twice before attempting predatory practices. Understanding your rights under the Consumer Credit Act means you can borrow with more confidence and know where to turn if something goes wrong.

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• TAGS:
• Buy Now Pay Later
• Consumer Credit Act
• Debt Service Ratio
• Moneylenders
• Pawnbrokers
• Protected From Predatory Lending Practices
• Unfair Fees