The Consumer Credit Oversight Board Task Force in Malaysia recently shared the Consumer Credit Act consultation document, which is the new act that aims to properly regulate and consolidate all consumer credit activities under its unit, and to also support “fair” lending and “responsible” conduct by credit service providers.
The task force is reportedly being led by Malaysia’s Ministry of Finance, Bank Negara Malaysia (the nation’s central bank) and Securities Commission Malaysia along with assistance from the Ministry of Housing and Local Government, Ministry of Domestic Trade and Consumer Affairs, Ministry of Entrepreneur Development And Cooperation, and Companies Commission of Malaysia.
The consultation document is the first of a two-part consultation paper, which offers an extensive overview and approach of the suggested regulatory guidelines.
The second part, which is expected to be published in Q4 of this year, will focus on the various aspects of the authorization/licensing framework that may apply to credit service providers in the Southeast Asian country.
The framework document notes that credit consumers are people who acquire or plan to get credit from a credit provider and also MSMEs who get credit from a credit provider not exceeding RM 500,000.
Based on this particular definition, P2P lending platforms could also have to adhere to the minimum requirements under the Act as they usually offer funding to smaller businesses under the amount of RM 500,000.
The task force aims to introduce the regulatory framework in three different stage. In the first phase, credit activities that should be regulated include the following: Buy Now, Pay Later or BNPL, Factoring Leasing, Impaired Loan Buyers, and Debt Collection Agencies.
As part of the initial phase, BNPL firms, factoring, or leasing firms will have to obtain appropriate licensing from the Consumer Credit Oversight Board, and credit service providers who are active in debt collection and the acquisition of impaired loans will be required to register.
Because BNPL is mostly an unregulated business, it is now being expected that a certain grace period may be provided during the transition in order to become regulated service providers.
In phase two, the act aims to regulate Hire Purchase, Credit Sales, Moneylender and Pawnbrokers.
As first reported by Fintech News Malaysia, these consumer credit activities are being regulated by entities such as the Ministry of Housing and Local Government and Ministry of Domestic Trade and Consumer Affairs.
During phase 3, which is expected to take place around 2030, additional proposals should be implemented in order to look into the relevant regulatory framework for the financial services sector in the country.
The Task Force now seeks feedback which may be turned in by September 5, 2022 through email to CCAConsultation@bnm.gov.my.
The task force may also be conducting focus group discussions and other engagement sessions with industry participants in the coming months.
The consultation document can be accessed here.