New law targeting ‘buy now, pay later’ services in the making

About 2.9 million people were recorded as using the ‘buy now, pay later’ service as of the third quarter of 2023. (Bernama pic)

PETALING JAYA: The Consumer Credit Act (CCA) is being drafted to impose tighter regulations on credit providers, particularly those offering “buy now, pay later” (BNPL) services, says Bank Negara Malaysia (BNM).

BNM’s financial inclusion department director Nor Rafidz Nazri said a special body would be set up in the initial stage to oversee entities engaged in providing such services, Berita Harian reported.

“The consumer credit oversight board task force (CCOB), led by the finance ministry and two agencies, namely BNM and the Securities Commission, has been tasked with developing a comprehensive framework for this purpose,” he was quoted as saying.

“It aims to regulate the practices of non-bank entities offering credit services to consumers, in addition to regulating the providers of new credit products such as the BNPL service.”

Rafidz also said several other ministries are involved in the law’s enactment, including the domestic trade and cost of living ministry as well as the housing and local government ministry.

Meanwhile, the CCOB was quoted as saying that 2.9 million people were recorded using the BNPL service as of the third quarter of the previous year.

It said three major providers, namely Shopee, Grab, and Atome, dominated the BNPL industry based on the total number and value of transactions recorded.

“In terms of transaction volume, these three BNPL providers represent 97% and their value represents 96% of the total available.

“The use of BNPL saw double-digit growth in the third quarter of 2023, involving 52 million transactions worth RM4.3 billion,” it said.

CCOB is an independent authority under the finance ministry responsible for administering the CCA.

Previously, Berita Harian reported an increasing number of youths, some as young as 19, getting caught in debt, with many feeling burdened when financing motorcycles through credit agencies, as revealed by the credit counselling and debt management agency.

NGOs and consumer associations subsequently proposed tighter loan terms from creditors.

Through the BNPL service, users are provided with online credit platforms offering interest-free monthly instalment plans without any loan restrictions.