PETALING JAYA: Malaysia’s credit and financing landscape is poised for major transformation under the Consumer Credit Act (CCA) 2025, amid a RM1.38 trillion national household debt.
Stakeholders pointed out that the reform will help enhance financial awareness and reduce the debt burden of regular and heavy borrowers.
“The CCA 2025 introduces a new level of transparency,” said Alan Tan, president of the Malaysia Financial Planning Association.
He said credit providers, including non-bank entities like retailers, telcos, insurance companies, pawnshops, online shopping platforms and buy-now-pay-later (BNPL) services, will have to disclose all fees, repayment schedules, late charges and compound interest clearly.
“Previously, many non-bank loans were not visible in the Central Credit Reference Information System (CCRIS) and led to over-commitment.
“We’ve had a regulatory blind spot where consumers could accumulate significant debt that wasn’t properly monitored.
“Now, all providers must report to a centralised system, making it harder for consumers to overlook key details. When lenders can see all commitments, they can make more responsible lending decisions.
“This transparency is game-changing. Imagine seeing an RM500 purchase turn into RM650 due to late fees, or realising small commitments add up to RM400 monthly, it naturally encourages thoughtful spending,” he told The Star.
Tan expects a gradual reduction in household debt through better-informed decision-making by both lenders and borrowers, leading to sustainable change that our financial planning community needs.
Tan added that one of the most significant shifts introduced by the CCA is the mandatory affordability assessments, where lenders evaluate a borrower’s income, existing debts and repayment capacity.
He said this provision is crucial in Malaysia, where household debt is among the highest in the Asean region.
“This step ensures consumers aren’t taking on more debt than they can manage, reducing the risk of spiralling into further financial distress.”
The Act, he said, also introduces supportive measures for borrowers facing financial hardship.
“If unforeseen situations occur, credit providers are legally obliged to offer solutions like restructuring repayment plans before taking legal action.
“Moreover, the establishment of a Consumer Credit Commission ensures robust oversight of non-bank credit providers,” he said.
Calling for consumer education and awareness, Tan suggested scenario planning to prepare for potential income reductions and called for mindfulness when considering new credit.
“Impulse decisions often lead to regret, especially with credit. The convenience of instant approval shouldn’t outweigh careful consideration.”
He also foresees agencies like the Credit Counselling and Debt Management Agency expanding their services to include non-bank credit providers, leveraging their expertise in comprehensive debt counselling.
The Federation of Malaysian Consumers Associations (Fomca) said the CCA finally creates a level playing field for all credit providers, which in turn reduces the risks of predatory lending practices in the industry.
“By bringing non-bank lenders like BNPL services into the regulatory net, this will ensure all credit providers are regulated, regardless of their size or industry.
“Over time and with all commitments visible in the Central Credit Reference Information System, banks and regulators will have a clearer picture of borrowers’ obligations that help reduce risks of over-indebtedness,” Fomca vice-president Datuk Indrani Thuraisingham told The Star.
However, she stressed that transparency from the Act alone would not lower debt levels, suggesting that mandatory affordability checks and penalties for irresponsible lending also be implemented.
To further help consumers from falling into debt traps, she also suggested that CCA make it mandatory for BNPL schemes to provide clear standardised disclosure of costs, including late fees and interest.
“This would allow borrowers to compare costs before making a decision.
“Combined with more financial literacy campaigns and a push towards a responsible borrowing culture, consumers will be more empowered to make better informed financial decisions.
“Mandatory periodic reviews of the Act should be implemented so it can adapt to any future digital credit models,” she added.
