Consumer Credit Act: Insights Of Phased Implementation

Consumer Credit Act: Insights Of Phased Implementation

Introduction of the Consumer Credit Bill 2025

Regulations continue to be seen as critical to achieve stability in the increasingly complex and multi-faceted financial system. The Finance Minister II, Datuk Seri Amir Hamzah Azizan in 2024 called for the need to enact new laws in tackling the insufficiently addressed issues relating to non-bank financial institutions.  The recent Consumer Credit Bill 2025 (“Bill”) was tabled for the first reading by Deputy Finance Minister Lim Hui Ying on 4th of March 2025 with the second and third readings scheduled for the upcoming meeting of the Dewan Rakyat. The Bill was introduced to improve the level of protection for credit consumers in Malaysia by regulating credit businesses. This is achieved through regulating all credit businesses and credit service businesses, ensuring proper conduct and responsible lending practices in the credit industry and promoting a fair, efficient and transparent credit industry.

In our previous article published in June 2022, Nazmi Zaini Chambers explored the then-proposed Consumer Credit Act (“CCA”) and provided a comparative analysis against similar legislation in other jurisdictions. Building on that foundation, this article shifts the focus to the recent developments surrounding the Bill, the challenges it seeks to address within Malaysia’s financial ecosystem, and insights on its phased implementation.

Regulated Entities under the Bill

The term “credit” is defined broadly under the Bill to encompass the various ways in which financial obligations may arise. The term includes any arrangement, agreement or facility regardless of the name and form, including those structured according to Shariah principles that results in someone owing money, incurring a financial obligation or paying in installments for goods or services, as well as any other arrangement as may be specified by the Consumer Credit Commission (“Commission”).[1]

However, not all forms of credit are under the purview of the Bill. The form of credit that remains outside the regulatory scope is as follows[2]:

  • employers to their directors, officers, or employees as a benefit under the service scheme for any purpose;
  • the Government, State Governments, local authorities, statutory bodies, government-linked companies (“GLCs”) or state corporations;
  • entities funded by the Government or State Governments, specifically for administering or implementing micro-financing schemes;
  • foundations for educational purposes;
  • individuals to another person, without imposing any interest or profit in the course of a customary, social, friendly, or family relationship;
  • licensed insurers under the Financial Services Act 2013 to policyholders for maintaining premium payments;
  • licensed takaful operators under the Islamic Financial Services Act 2013 to takaful participants for maintaining contribution payments under a takaful certificate; and
  • licensed entities in Labuan under the Labuan Financial Services and Securities Act 2010 or the Labuan Islamic Financial Services and Securities Act 2010, exclusively for Labuan-related purposes.

A comprehensive understanding of who is regulated under the Bill also requires examining the types of credit-related businesses it regulates, which are classified into two (2) main categories.

“Credit business” includes the activities of moneylending, pawnbroking, hire purchase, credit sale and buy now pay later (“BNPL”) schemes which have grown rapidly in recent years. Leasing and factoring are also part of this category.[3] Similarly, the Islamic credit business includes Islamic financing facilities, Islamic pawnbroking, Islamic hire purchase, Islamic credit sales, Islamic BNPL schemes, Islamic leasing and Islamic factoring.[4]

However, it shall be noted that the term “moneylending” carries the meaning assigned to it under Moneylenders Act 1951 and does not include the subscription to or purchase of debt securities, such as stocks issued under the Loan (Local) Act 1959, treasury bills issued under the Treasury Bills (Local) Act 1946, investments made under the Government Funding Act 1983 and debentures as defined in Section 2 of the Capital Markets and Services Act 2007.[5]

In addition, the BNPL schemes do not include the definition of moneylending as defined in the Moneylenders Act 1951 and the credit sale transaction as defined in the Consumer Protection Act 1999.[6]

On the other hand, “credit service business” refers to ancillary services that support or manage credit arrangements. This includes businesses involved in the services related to debt collection, impaired loan or financing acquisition, repossession, debt counselling and management and online crowdlending platforms.[7]

Another important aspect of the Bill is the definition of a credit consumer, which determines who is entitled to protection under the Bill. A credit consumer can be an individual who obtains, has obtained or intends to obtain credit wholly or predominantly for personal, domestic or household purposes. It also includes micro or small enterprises that obtain, have obtained or intend to obtain credit that does not exceed the threshold amount specified by the Minister.[8] This reflects the growing need to protect small businesses who often face challenges accessing fair and transparent financing.

Moreover, the law recognizes credit consumers as individuals who act as social guarantors without seeking any profit or any other person or class, category or description of person as may be specified by the Commission.[9]

Key Regulatory Requirements under the Bill

The Bill also covers on the authorisation regime, as reflected in the table below:

Type of Requirement Authorising Body Entities Covered Minimum Financial Requirement Fit and Proper Requirement
Licensing Requirement Commission ·       BNPL schemes

·       Leasing

·       Factoring

·       Islamic BNPL schemes

·       Islamic leasing

·       Islamic factoring

 Yes. Entities are required to meet financial requirements as may be prescribed by the Commission. Applicable to controllers, directors, partners, and senior management.

 

 
Registrar ·       Islamic financing facility

·       Islamic pawnbroking
Registration Requirement Commission ·       Debt collection

·       Impaired loan or financing acquisition

·       Debt counselling and management

 Yes. Entities are required to meet financial requirements as may be prescribed by the Commission. Applicable to controllers, directors, partners, and senior management.

 

 
Declaration Requirement Commission ·       Entities carrying on a credit business or credit service business, as set out in Paragraph 1 or Paragraph 3 of Schedule 4, that do not involve a credit consumer. N/A N/A

While the credit regulatory framework imposes licensing and registration obligations on credit providers and credit service providers, it is important to note that certain entities are exempt from these requirements.

Specifically, licensing and registration requirements do not apply to the following entities[10]:

  • Licensed banks and licensed insurers as defined under subsection 2(1) of the Financial Services Act 2013;
  • Licensed Islamic banks and licensed takaful operators as defined under subsection 2(1) of the Islamic Financial Services Act 2013;
  • Prescribed institutions under subsection 3(1) of the Development Financial Institutions Act 2002;
  • Approved issuers of designated payment instruments such as credit cards and charge cards under subsection 2(1) of the Financial Services Act 2013;
  • Approved issuers of designated Islamic payment instruments such as credit card-i and charge card-i under subsection 2(1) of the Islamic Financial Services Act 2013;
  • Licensees under section 2 of the Money Services Business Act 2011 [Act 731]; and
  • Co-operative societies registered under subsection 7(1) of the Co-operative Societies Act 1993.

Implications of the Bill on Credit Providers and Credit Service Providers

The Bill seeks to enhance transparency, prevent over-indebtedness, and harmonise credit laws through a unified legal framework. It also aims to safeguard consumer welfare by setting clear standards and promoting responsible lending practices. However, this also entails potential challenges for credit providers and credit service providers, particularly with the strict licensing requirements and the uncertainty surrounding the discretionary powers of the relevant authorities, which we will discuss below.

Credit providers and credit service providers are subject to a complex licensing and registration process which includes meeting the minimum financial requirements as may be specified by the Commission or the Registrar.[11] While meeting such minimum requirement ensures a certain baseline of competence, this could ultimately pose as a challenge especially credit related businesses which in return could discourage participation and create barrier for new entries. Additionally, the Bill lays out the requirement for such licensed credit providers to adhere to the fit and proper requirements[12] where the Commission or the Registrar may specify such requirements to a controller director, partner or senior management of a licensed credit including the minimum criteria in relation to personal integrity and reputation, competency and capability and also financial integrity.

On top of that, the uncertainty of discretionary powers accorded to the regulatory bodies may also pose as a challenge to credit providers. While discretionary powers give liberty to the authority to change or adapt to new trends, it simultaneously diminishes the legal certainty and predictability for those who are regulated. The Bill has accorded authority to the Commission or the Registrar to refuse the application for a license on the ground that the Commission or the Registrar is of the opinion that it would be contrary to the interests of the public.[13] At this juncture, the term “contrary to the interests of the public” remains undefined by the Bill which would cause the interpretation to be at the sole discretion of the Commission or the Registrar, leaving credit providers without a clear and measurable standard.

Phased Implementation Approach

The transformation of the consumer credit regulatory landscape will take place in phases, allowing for a more measured and seamless transition. This phased approach aims to minimise potential disruptions within the industry while providing the Consumer Credit Oversight Board (“CCOB”) the necessary time and space to strengthen its capacity and readiness to take on expanded responsibilities.[14]

The phased approach will be implemented as follows:

  1. Phase 1 (2025 – 2027)

Under the proposed framework, the Commission will be established to oversee credit providers that currently operate outside of any regulatory authority. This includes entities offering BNPL services, factoring companies, and leasing firms. The Commission will also regulate credit service providers, such as impaired loan buyers, debt collection agencies and debt counselling and management agencies, bringing greater oversight and accountability to these sectors.

Meanwhile, under the Bill, regulatory responsibility for Shariah-compliant financing and pawn broking (Ar-Rahnu) will fall under the Ministry of Housing and Local Government (“KPKT”). This move aims to provide clearer regulatory guidance and support for these industries.

Additionally, the Ministry of Domestic Trade and Cost of Living (“KPDN”) will introduce amendments to the Hire Purchase Act 1967. These changes are intended to make the law more consumer forward, while also addressing the challenges of digitalisation in hire purchase activities under Phase 1.

  1. Phase 2 (2028 – 2030)

Phase 2 of the implementation will involve the transfer of regulatory functions related to consumer credit activities from existing ministries to the newly established CCC.

At present, oversight of the consumer credit industry is divided among various ministries. The KPDN, for example, is responsible for regulating hire purchase, Islamic hire purchase, credit sales, and repossession agents. Meanwhile, KPKT oversees moneylenders, Islamic moneylenders, pawnbrokers, and Islamic pawnbrokers (Ar-Rahnu). With the establishment of the CCC, these regulatory functions will be centralised under a single authority to ensure consistency and streamlined supervision of the consumer credit landscape.

  1. Phase 3 (2031 onwards)

Phase 3 focuses on the potential centralisation of conduct regulation for financial market activities in Malaysia. This initiative is proposed to be realised through government plans to integrate financial conduct regulation under one body.[15] However, it is to be noted that this phase remains under active review.

Bodies Established under the Bill

The Bill has introduced several key bodies to strengthen the supervision of non-bank and non-supervised credit providers. Non-bank credit providers have been seen to gain significant traction over the past few years, this is reflected as Bank Negara Malaysia has recorded 46 entries of Non-bank and E-Money Issuer as of 2025 which, among others includes AEON Credit Service Berhad, ShopeePay Malaysia Sdn Bhd and Touch ‘n Go Sdn Bhd.[16] Despite the fact that these entities are subjected to the regulations by Bank Negara Malaysia, the minimal supervision of these credit providers remains an ongoing concern.

As highlighted in our previous publication, the introduction of a single statute for consumer credit in Malaysia[17] and the establishment of a dedicated regulatory body was key to ensure clarity, consistency, and effective enforcement. In line with the suggestions, the Bill introduces the Commission as the first regulatory body established in the Bill, which is identified as a corporate body with the capacity to sue and be sued in its name.[18] This highlights a level of independence and authority to enforce compliance and safeguarding consumer rights which is under its purview.

The Commission operates on several main functions including to promote the proper conduct among credit providers and credit service providers, to promote the development of the consumer credit industry and other matters consequential to the functions of the Commission under the Bill.[19] The Commission is empowered to regulate all matters in relation to consumer credit contributing towards a fair and transparent credit market.[20] Empowering the Commission with a broad authority promotes its effectiveness by being able to adapt to various aspects and responding towards new emerging trends and challenges that would emerge. Aside from that, being authorised to set standards and guidelines promotes an ethical practice among credit providers. The Commission are also able to establish committees and engage with experts strengthen its crucial decision making, ultimately establishing their position as the powerhouse in promoting a sustainable and responsible consumer credit landscape in Malaysia.

The introduction of a Regulatory and Supervisory Authority is also a critical component to ensure an effective oversight towards Malaysia’s consumer credit landscape. By including a wide array of bodies such as the Commission, Bank Negara Malaysia and various ministries, the framework promotes for a collective and harmonious approach to the regulation, aiding in a comprehensive supervision towards credit providers.[21]

The Bill also establishes an Advisory Committee, which plays a pivotal role in supporting effective compliance with consumer credit regulations. The Advisory Committee is tasked with formulating policies and strategies aimed at protecting credit consumers and fostering a strong regulatory environment. Its responsibilities include promoting and monitoring the effective regulation of the consumer credit industry and ensuring the consistent and effective implementation of the Bill’s provisions.[22]

In addition to the above, the Bill stipulates that the functions and powers of the Regulatory and Supervisory Authority are supplementary to those already vested in similar authorities under other relevant laws.[23] This aims to create a parallel regulatory framework, allowing the Regulatory and Supervisory Authority to continue overseeing entities within their respective sectors while adhering to their existing legislative mandates.

Business Conduct and Credit Consumer Protection Requirements

Apart from establishing critical committees and authority, the Bill also introduces a general duty for credit providers and credit service providers to act in a fair, responsible, and professional manner when dealing with credit consumers.[24] This foundational obligation is intended to foster trust and enhance consumers’ protection within the credit industry.

While the Bill establishes this main duty, it delegates the finer details of business conduct to be further defined through regulations, standards or guidelines issued under the Bill.[25] These supplementary instruments will offer practical guidance and regulatory clarity, covering a range of essential areas that ensure ethical and transparent business practices.

Among the expected areas of regulation are prohibited business conduct, promotional activities and advertisements in which standards will be introduced to govern the promotion of credit-related services as well as transparency and disclosure requirements whereby credit providers and credit service providers furnish consumers with clear, accurate and timely information to enable informed financial decisions.

The Bill is also expected to address the fairness of contractual terms and to provide guidelines or regulations specifically on the imposition of interest, profit, fees, or other charges. For example, to prevent over-indebtedness, providers will be required to assess a consumer’s ability to repay before extending credit. In circumstances where affordability cannot be established, the extension of credit may be prohibited altogether.

Notably, the approach aligns with our earlier recommendations in our previous publication advocating for a single statute on consumer credit in Malaysia, in which we advocated for specific provisions to prohibit oppressive, harsh, and unfair contract terms. The inclusion of this principle into the new regulatory framework marks a positive step towards fostering fairer, more transparent, and consumer-focused credit practices.

In addition, the Bill is expected to introduce ethical standards for debt collection practices, requiring that such efforts be conducted respectfully and without harassment or undue pressure. Credit providers may also be required to offer support to credit consumers facing financial hardship, particularly to assist them in meeting their repayment obligations under existing credit agreements.

To protect consumer rights and promote accountability, the framework will mandate the establishment of effective complaint-handling and dispute resolution mechanisms. Moreover, those representing credit providers, including officers, employees or third-party agents must ensure they are adequately trained to engage professionally with credit consumers. Finally, the proper management of documents and consumer-related information will be regulated to safeguard data privacy and maintain the integrity of credit consumer records.

Conclusion

The enactment of the Bill marks a significant step forward in strengthening the protection of credit consumers, particularly in addressing gaps caused by the absence of dedicated regulations and the fragmented nature of the current legal framework. With this legislative development, credit consumers can look forward to fairer terms of engagement, more professional and ethical debt collection practices, and improved mechanisms for complaint handling and dispute resolution.

Beyond consumer protection, the proposed framework is also poised to benefit credit providers and credit service providers by offering greater clarity and consistency in regulatory expectations. By reinforcing the principles of fair, responsible, and ethical credit practices, the Bill fosters greater confidence in the credit and credit services industry, creating a more sustainable, and forward-looking regulatory approach is expected to support the development of a more resilient and inclusive credit ecosystem.

If you have any questions or would like further insights, feel free to reach out to our Financial Services & M&A Legal Associates, Maryam Amilah Zaini (maryam@nzchambers.com) and Mawaddah Hani, or our Pupil-in-Chambers, Naufal Haqeem.

Authors:

  1. Maryam Amilah
  2. Mawaddah Hani
  3. Naufal Haqeem

References:

[1] Section 5(2) of the Bill.

[2] Schedule 1 of the Bill.

[3] Paragraph 1, Schedule 2 of the Bill.

[4] Paragraph 2, Schedule 2 of the Bill.

[5] Paragraph 3(a), Schedule 2 of the Bill.

[6] Paragraph 3(e), Schedule 2 of the Bill.

[7] Paragraph 1, Schedule 3 of the Bill.

[8] Section 5(1) of the Bill.

[9] Ibid.

[10] Schedule 5 of the Bill.

[11] Section 44 of the Bill.

[12] Section 45 of the Bill.

[13] Section 43(1)(e) of the Bill.

[14] Information regarding Consumer Credit Bill 2025 (CCB) – CCOB Task Force. (n.d.). Accessed via https://ccob.my/information-regarding-consumer-credit-bill-2025-ccb// .

[16] Financial Sector Participants Directory: Nonbank-emoney-issuer. Bank Negara Malaysia. (2025). Accessed via:https://www.bnm.gov.my/regulations/fspdirectory?p_p_id=com_liferay_asset_publisher_web_portlet_AssetPublisherPortlet_INSTANCE_jXC730NRlqU0&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_r_p_tag=nonbank-emoney-issuer

[17] A Single Statute for Consumer Credit in Malaysia. (2022). Nazmi Zaini Chambers. Accessed via: https://nzchambers.com/wp-content/uploads/2022/07/A-Single-Statute-for-Consumer-Credit-in Malaysia.pdf

[18] Section 6 of the Bill.

[19] Section 7 of the Bill.

[20] Section 8 of the Bill.

[21] Section 34 of the Bill.

[22] Section 38 of the Bill.

[23] Section 34(5) of the Bill.

[24] Section 84 of the Bill.

[25] Section 85(1) of the Bill.

Published Date: 24 April 2025