Govt to create consumer credit law to protect borrowers

KUALA LUMPUR: The government will expedite the creation of the Consumer Credit Act to protect consumers and encourage a healthy credit market, says the Prime Minister.

Tun Dr Mahathir Mohamad said the Act was pivotal as household debt now stood at 82.1% of the country's gross domestic product (GDP).

"This is higher than other countries that have higher income per capita like Italy, which is 40.3% of its GDP, Japan (58.1%), and the United States (76.3%).

"Although the risk of household debt on the domestic finance is under control, there are signs of difficulty in repaying loans, especially among those earning less than RM5,000 monthly and are living in urban areas," he said in his opening speech at the National Financial Literacy Strategy 2019-2023 on Tuesday (July 23).

Dr Mahathir said this observation was supported by the increasing number of borrowers who participate in debt management programmes organised by the Credit Counselling and Debt Management Agency (AKPK).

"I was made to understand that 80% of the participants in these programmes were too optimistic about their ability to repay their debts and bear with the cost of living when they decided to borrow (take loans).

"Some did not even think of repaying these debts when borrowing," he added.

"Therefore, it is important to increase financial literacy among the people and the formation of the new Consumer Credit law will strengthen the protection framework for credit consumers in the country," said Dr Mahathir.

He also said that the ability to make sound and wise financial decisions was not only relevant when wanting to purchase financial products or borrowings.

The ability to make sound financial decisions in purchasing insurance, investment and managing their income would definitely help consumers to lead a life free of financial burdens.

Dr Mahathir said it was important for consumers to protect themselves from unfair market practices or manipulation as we lived in an era of complex and challenging financial environment.

He added that it was vital for consumers to be aware on the modus operandi in financial crimes.

He also advised consumers to be wary of financial services offered in the cyber world so they would not be exposed to cyber crimes.