Speed Up Drafting Of CCA To Regulate BNPL; FOMCA

The Federation of Malaysian Consumer Associations (FOMCA) has urged the authorities to speed up the drafting of the proposed Consumer Credit Act (CCA) to regulate the consumer credit market including BNPL providers.

It said the CCA, which is expected to be tabled in Parliament in the second quarter of 2023, is timely as it would ensure the stability and growth of the nation’s financial system, according to Bernama.

FOMCA deputy president Mohd Yusof Abdul Rahman said since BNPL has yet to be regulated by the authorities, the system is vulnerable to interest rate manipulation by service providers.  

BNPL allows customers to purchase goods and services and pay for them in monthly interest-free instalments. However, other charges are imposed on them such as for processing and late payments.

In some cases, the total charges imposed by BNPL providers may be higher than the interest and other fees imposed by conventional lenders.

“Bank Negara Malaysia (BNM) must speed up the process of enacting the CCA so that all legislation related to the financing system, such as the credit act, hire purchase act and money lending act can be regulated (by the government).

“Currently, only those involved in hire purchase schemes are regulated (by the Hire-Purchase Act 1967) but other schemes like BNPL are not regulated by any law,” said Mohd Yusof.

At present, any person – regardless of their creditworthiness – can opt for a BNPL scheme. This is the reason BNPL has become the choice of newly-married couples who resort to this scheme to purchase household items like television, washing machine, and refrigerator.

“Young people or families turn to BNPL because, being young, they don’t earn enough to buy things like electrical gadgets, mobile phones and furniture on cash terms.

“The worrying part is that if they fail to manage their finances well, they face the possibility of being imposed penalty charges or having their goods seized,” said Mohd Yusof.

BNPL can also potentially be abused by shopaholics during their shopping sprees, thus exposing them to the risk of racking up debts.

The easy payment schemes promoted by BNPL providers are a sure-fire way of attracting the attention of shopaholics who are known for their compulsive shopping tendencies.

“BNPL is one of the marketing techniques used by sellers to increase their sales… they have 1,001 ways to influence buyers, especially shopaholics,” said Prof Datuk Dr Mohamed Fadzil Che Din, an expert in counselling psychology at Universiti Pertahanan Nasional Malaysia.

“A strategy like BNPL will indirectly pique the interest of shopaholics to go shopping even if their credit status is problematic.

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