KUALA LUMPUR: The government is committed to expediting the proposed tabling of the Consumer Credit Act, which will make it mandatory for non-bank credit providers to adhere to prudential standards and guidelines, says the Finance Ministry.
In a written Parliamentary reply Tuesday (Oct 29), the ministry said this would apply to non-bank credit providers, such as Buy Now Pay Later (BNPL) providers.
“This Act aims to protect financial consumers in BNPL schemes and reduce the risk of excessive indebtedness, particularly among young and low-income borrowers.
“Moving forward, the government will continue to monitor household debt levels and take appropriate steps to ensure that household debt growth remains manageable and in line with borrowers' repayment capabilities,” it said.
The ministry said this in a reply to a question from Onn Abu Bakar (PH-Batu Pahat) on the nation’s household debt and the Finance Ministry's steps to introduce stricter policies to control the rise in household debt.
As of June, the household debt stood at RM1.57 trillion representing 83.8% of the country’s gross domestic product (GDP).
The largest portion of household debt comprised of housing loans, making up 61% of total household debt, followed by vehicle loans at 13.5%, personal financing (12.4%), and loans for other purposes, such as non-residential property purchases, credit card debt, securities, among others.
As part of ongoing efforts to control household debt and strengthen household resilience, the ministry said initiatives such as the Policy Document on Responsible Financing and enhancing financial literacy among the public have been implemented.
“The policy ensures individuals borrow within their repayment capacity within a set timeframe to avoid excessive debt burdens.
“As a result, the household sector borrows within its means, with the debt service ratio (DSR) maintained at prudent levels. As of June, the median DSR for total loans was 35%, while the median DSR for newly approved loans was at 41%,” it said.
In June, Consumer Credit Oversight Board (CCOB) Task Force said the proposed Consumer Credit Act will seek to ensure that non-bank credit providers conduct affordability assessments on their potential customers in order to control household debt levels.
The affordability assessment, CCOB elaborated is not merely checking credit background but an intensive assessment to inspect whether the borrower is able to fulfill their future obligations without causing undue financial stress
