Current issues on consumer credit

Consumers could take loans or incur debt through a consumer credit system and pay it back
over time, and those with credit can buy things or assets without having to pay in cash up front.
Consumer credit is more commonly used to refer to unsecured debt taken to pay for routine
goods and services. The Malaysian Ministry of Finance (MoF) has begun their initiatives to
regulate the industry of consumer credit services to promote a reliable and confidence-inducing
consumer credit ecosystem, which is in progress under the credit industry regulatory framework
via the enactment of the Consumer Credit Act, as everyone is aware (CCA). The goal is to
improve credit consumer protection in Malaysia, as there are an increasing number of
unregulated entities active in the consumer credit market, such as Buy Now, Pay Later (BNPL)
companies, non-bank factoring and leasing companies, impaired loan buyers (ILB), and debt
collection agencies (DCA). Bank Negara Malaysia (BNM), the Securities Commission (SC), the
Ministry of Domestic Trade and Consumer Affairs (KPDNHEP), the Ministry of Housing and
Local Government (KPKT), the Ministry of Entrepreneur Development and Cooperatives
(KUSKOP), and the Malaysia Co-operative Societies Commission (MCSC) all supported the
MoF initiatives (CCM). The CCA intends to develop a framework for authorisation for nonbank
firms that offer credit and credit services in order to safeguard the vulnerable.

Because of their simplicity of use and lack of interest costs, Buy Now, Pay Later (BNPL)
services have radically transformed the landscape of personal financing, allowing them to skirt
national credit restrictions. The number of active BNPL accounts in Australia climbed from 5
million to 7 million in the fiscal year 2022-2023, according to Reserve Bank of Australia
statistics. These customers spent a total of A$16 billion, 37% more than in prior years (and
accounting for 2% of all card transactions). According to the results of The Conversation's 2021
study, almost half of young people are sceptical about BNPL services, feeling they have a
detrimental influence on their financial conduct. Furthermore, since wages are failing to keep up
with growing living costs, notably for electricity and housing, the widespread usage of BNPL
should raise regulatory concerns. As a result, The Treasury's consultation paper on regulating
the BNPL business underlines the significance of subjecting BNPL entities to the same sort of
responsible lending criteria as banks.

in the meanwhile, consumer credit in the United States expanded at a seasonally adjusted
annual pace of 6.9 percent. Revolving credit rose at a pace of 10.4 percent per year, while
nonrevolving credit increased at a rate of 5.8 percent per year. In December 2022, total
consumer credit in the United States climbed by $27.1 billion, following an upwardly revised
$25.8 billion gain the previous month, but falling short of market estimates of $28.3 billion. This
translates to a seasonally adjusted annual growth of 6.9%, up from 6.6% in September.
Nonrevolving credit, such as vehicle and school loans, rose at a 5.8% annual pace, while
revolving credit, such as credit cards, increased at a 10.4% annual rate. Mortgage loans, the
most frequent kind of household debt, are not included in the Fed's consumer credit data.

https://www.nst.com.my/business/2022/08/819333/consumer-credit-act-regulate-consumer-
creditservices-protect-vulnerable https://gocardless.com/en-us/guides/posts/what-are-the-
advantages-of-consumer-credit/ https://www.investopedia.com/terms/c/consumercredit.asp
Bernama. (2022, August 4).

Consumer credit act to regulate consumer credit services, protect the vulnerable. New Straits
Times. https://www.nst.com.my/business/2022/08/819333/consumer-credit-act-regulate-
consumer-creditservices-protect-vulnerable

‘buy now, pay later’ services. The Conversation. https://theconversation.com/90-of-young-

people-had-financial-troubles-in-2022-and-27-used-buynow-pay-later-services-195809