The Consumer Credit Act 2025 is Malaysia’s new law designed to regulate the country’s credit landscape. Six types of consumer credit services have been operating without proper regulation, including Buy Now Pay Later platforms, business financing services like factoring and leasing, debt collection agencies, and debt management services.

The government is introducing rules and oversight for parts of the credit industry that previously had little to no supervision. With BNPL transactions alone reaching RM9.3 billion in the first half of 2025, the Act tackles real problems affecting millions of Malaysians.

The law establishes the Consumer Credit Commission as the new regulatory body. This Commission will oversee non-bank credit providers and service providers, ensuring they meet minimum standards of conduct and transparency.

When Did The Consumer Credit Act Come Into Effect?

The Consumer Credit Act 2025 was passed by Parliament in July 2025 and is expected to be gazetted by the end of 2025, the final step before becoming enforceable law.

The government is implementing the Act in three phases:

Phase 1 (preparation phase)

Existing regulatory authorities continue overseeing their respective areas while incorporating new consumer protection provisions from the Act. These authorities include the Ministry of Housing and Local Government, the Ministry of Domestic Trade and Cost of Living, and others. Licensed moneylenders, for instance, will need to comply with enhanced consumer protection rules under the Ministry of Housing and Local Government’s oversight.

Phase 2 (expected 2028)

The Consumer Credit Commission takes over regulatory functions from the Ministry of Housing and Local Government and the Ministry of Domestic Trade and Cost of Living. This includes moneylending, pawnshops, hire purchase, and credit sales activities.

Phase 3 (targeted 2031)

Full consolidation of all consumer credit regulation under the Consumer Credit Commission following a comprehensive government review. At this stage, the Commission will be the single authority overseeing most consumer credit activities in Malaysia.

This phased approach gives the industry time to adapt and minimises disruption to existing credit services Malaysians rely on. For BNPL users specifically, stricter oversight began taking shape even before the Act’s passage, with providers facing pressure to operate more transparently throughout 2024 and 2025.

How Does This Law Protect Borrowers?

The Consumer Credit Act 2025 introduces several concrete protections that address common problems Malaysians face.

Mandatory affordability assessments

Credit providers must now check whether you can actually afford to repay before approving your application. They’ll look at your financial means, existing obligations, and debt repayment capacity. No more rubber-stamping applications without proper assessment.

Truth in advertising

Promotional materials cannot describe products as “free” or at “no cost” if conditions apply or other fees exist. Advertisements must be accurate, clear, and not misleading. Key product features and charges must be prominently displayed so you know exactly what you’re signing up for.

Fair contract terms

Credit agreements cannot contain unfair provisions. Interest rates and fees must not be excessive. Contracts must include payment reminders at reasonable intervals before amounts are due, giving you proper notice.

Transparent pricing

The Act requires credit providers to disclose the Effective Interest Rate (EIR), which shows the true cost of borrowing by accounting for compounding effects. This makes it easier to compare offers across different providers, since you’re seeing the real rate rather than the nominal rate.

Data protection

Your personal and financial information must be used only as specified in your credit agreement and in compliance with the Personal Data Protection Act. Providers cannot share or use your data for purposes beyond what you agreed to.

Access to redress

The Act establishes a Consumer Credit Tribunal where you can file complaints about non-disclosure, misleading practices, or unfair treatment. The Tribunal can order compensation, correct credit terms, and impose fines or sanctions on providers who violate the rules.

These protections extend to individuals and small businesses seeking credit primarily for personal or domestic purposes, or business credit not exceeding RM500,000. The Act also protects individuals acting as non-profit guarantors, which means people who guarantee loans for others without charging fees.

What Are The Key Changes From Previous Regulations?

Malaysia’s consumer credit framework has been spread across multiple laws and ministries. The Hire Purchase Act 1967, Moneylenders Act 1951, Pawnbrokers Act 1972, and parts of the Consumer Protection Act 1999 have all governed different aspects of credit. Each law had different standards, different regulators, and gaps where some providers were not clearly covered.

The Consumer Credit Act 2025 takes what Deputy Finance Minister Lim Hui Ying described as a “master act” approach. Rather than replacing all these laws immediately, it works alongside existing regulations while gradually consolidating oversight. The government stated that the Act “is complementary to existing acts under the administration of authorities, regulators and supervisors, and does not duplicate the functions or roles of existing ministries and agencies.”

Unified standards across all credit types

Credit providers and service providers now face consistent conduct requirements regardless of which type of credit they offer. Previously, a BNPL platform might have had minimal oversight while a traditional moneylender like Aeon Credit or BSN faced strict rules. This created situations where some providers could operate with far less scrutiny than others.

Licensing and registration requirements

Previously unregulated providers must now obtain licences (for direct credit providers) or register (for service providers like debt collectors). Operating without proper authorisation carries penalties up to RM5 million or five years imprisonment, or both.

Digital lending included

The Act explicitly covers fintech platforms, peer-to-peer lending, and digital credit services. This closes gaps where many digital lenders had been operating without clear regulatory oversight.

Enhanced Hire Purchase regulations

Complementing amendments to the Hire Purchase Act, the flat rate and Rule of 78 calculation methods are being abolished in favour of the reducing balance method and EIR disclosure. The Hire Purchase (Amendment) Bill 2025 was passed by the Dewan Rakyat on 8 October 2025 and is expected to be gazetted in the first quarter of 2026, with an 18-month grace period for lenders to transition their systems.

Under the Rule of 78, you paid the same total interest whether you settled early or not because interest was “front-loaded” into the early months of your loan. The new reducing balance method calculates interest only on your remaining loan balance, which means settling your car loan early will actually save you money.

The implementation follows a phased timeline designed to prevent disruption while building the Consumer Credit Commission’s capacity over several years.

What Should You Do If Lenders Violate The Act?

If credit providers violate the Act, you have several ways to take action.

File a complaint with the Consumer Credit Tribunal

This independent body was established specifically to handle credit-related disputes. You can lodge complaints about misleading practices, non-disclosure of terms, excessive fees, or unfair treatment.

The Tribunal process is designed to be accessible. You do not need a lawyer, filing fees are minimal, and resolution is faster than civil court proceedings. The Tribunal has authority to order providers to compensate you, correct problematic credit terms, and impose penalties on violators.

Report to the Consumer Credit Commission

For serious violations like operating without a licence, you can report providers directly to the Consumer Credit Commission, the regulatory body established under the Consumer Credit Act 2025. The Commission can investigate and penalise unlicensed operators.

Existing channels still available

You can also file complaints through the National Consumer Complaints Centre or the Ministry of Domestic Trade and Cost of Living. These bodies work with relevant authorities including the Tribunal for Consumer Claims Malaysia for broader consumer protection issues.

When filing any complaint, gather documentation such as credit agreements, payment records, correspondence with the provider, and advertisements or promotional materials you relied on. The more documentation you have, the stronger your position. Keep copies of everything related to your credit arrangement.

Does This Act Apply To All Types Of Loans And Credit?

The Consumer Credit Act 2025 focuses specifically on gaps in the existing regulatory framework, which means its application is more targeted than you might expect.

What’s covered

The Act covers Buy Now Pay Later services like Atome, GrabPayLater, and SPayLater, non-bank leasing and factoring, licensed moneylenders, pawnbroking services, non-bank hire purchase, credit sales, debt collection agencies, impaired loan buyers (companies that purchase bad debts), and debt counselling and management services.

What’s NOT covered

The Act does not cover licensed banks and financial institutions that are regulated by Bank Negara Malaysia like Maybank, CIMB, or Public Bank. It also does not cover credit cards and charge cards, insurance and takaful providers, or cooperatives, which are regulated by the Malaysia Co-operative Societies Commission.

The Act specifically targets “credit consumers,” which refers to individuals or small businesses obtaining credit mainly for personal or domestic purposes, or enterprises with credit not exceeding RM500,000. It also protects individuals acting as non-profit guarantors.

If you’re borrowing from a bank for a home loan, personal loan, or car financing, you’re still covered by Bank Negara Malaysia’s existing regulations under the Financial Services Act. The Consumer Credit Act fills the gaps around non-bank providers and services that previously had limited oversight.

You can check your credit score to understand your creditworthiness before applying for any credit products.

Know Your Rights

The Consumer Credit Act 2025 changes how non-bank credit providers must operate in Malaysia. If you use BNPL services, hire purchase financing, or deal with moneylenders, you’ll see better transparency, fairer terms, and stronger protections against predatory practices.

Know your rights. Check that your credit provider is properly licensed, understand the Effective Interest Rate you’re being charged, and don’t hesitate to file complaints if something feels wrong. The new Consumer Credit Tribunal and Commission exist specifically to protect you.

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