The Consumer Credit Bill 2025 was recently tabled for its first reading in the Dewan Rakyat by Deputy Finance Minister Lim Hui Ying on 4.3.2025, with the second and third readings scheduled for the next meeting of the Dewan Rakyat. If passed, the Bill will be known as the Consumer Credit Act 2025. The new law aims to establish a new regulatory body known as the Consumer Credit Commission and is set to bring significant changes to how credit is issued, regulated and managed, aiming to enhance consumer protection and financial transparency.
The rise in consumer credit in Malaysia has brought about a host of challenges, including rising levels of indebtedness, predatory lending practices, and insufficient consumer understanding of credit terms. In response to these challenges, the Malaysian government has recognised the need for a more comprehensive regulatory framework that not only controls lending practices but also promotes financial literacy and protects consumers from exploitative practices.
Key Objectives
The Consumer Credit Bill 2025 introduces a comprehensive framework aimed at strengthening the credit landscape in Malaysia. At its core, the Bill seeks to strike a balance between empowering consumers and holding credit providers to higher standards of conduct. Through its key objectives, the Bill focuses on enhancing consumer protection, promoting financial literacy, ensuring responsible lending practices, and fostering greater transparency and accountability in all credit transactions. These measures are designed to create a fairer, more informed, and more secure credit environment for both consumers and credit-related businesses.
Consumer Protection: To ensure that consumers are adequately protected in credit transactions and to prevent abusive or unfair lending practices. The Bill sets out a range of prohibited business practices, including misleading advertisements, exerting undue pressure, and using deceptive language in credit offers. Moreover, the Bill will require all credit providers and service providers to conduct their businesses fairly, responsibly, and professionally when dealing with consumers.
Promoting Financial Literacy: To encourage better financial understanding among consumers, especially in areas such as the implications of credit agreements, interest rates, and repayment schedules. The Bill aims to empower regulators to impose transparency and disclosure standards, ensuring that all credit terms are communicated in a clear, accurate, and non-misleading manner. These provisions help credit consumers make informed decisions and understand their rights and obligations.
Regulating Lenders: To establish strict regulations governing the conduct of credit providers. The Bill requires licensing or registration of all entities involved in credit-related businesses, and outlines the minimum financial, fit-and-proper, and operational requirements that credit providers must meet.
Transparency and Accountability: To require clear and comprehensive disclosure of terms and conditions in credit agreements, ensuring consumers understand the costs involved in borrowing and the risks associated with non-repayment. The Bill also includes measures for handling complaints and assisting consumers facing financial hardship.
Functions and Powers of the Commission
The Consumer Credit Commission’s functions and powers will encompass advising the Minister on consumer credit matters, guiding the Government on national consumer credit policy, promoting ethical practices among credit providers and service providers, fostering the growth of the consumer credit industry, and handling tasks related to its responsibilities under the Consumer Credit Act 2025. Additionally, the Consumer Credit Commission has the power to regulate all matters relating to consumer credit, as well as investigate and impose penalties on whoever fails to comply with its guidelines and regulations.
Consumer Rights & Remedies
Once passed, the Consumer Credit Act 2025 will provide a framework for consumer protection in the event of disputes or grievances with credit providers. Consumers will have the right to:
- File complaints: In cases of non-disclosure, misleading practices, or unfair treatment, consumers can lodge complaints with the Consumer Credit Tribunal, an independent body established under the Consumer Credit Act 2025.
- Seek redress: The Tribunal has the authority to issue orders for compensation or correction of credit terms, as well as impose fines or sanctions on offending credit providers.
- Data privacy protection: Consumers are entitled to the protection of their personal and financial information, ensuring that their data is used only in accordance with the terms of the credit agreement and in compliance with Malaysia’s Personal Data Protection Act (PDPA).
Licensing and Registration
The Consumer Credit Act 2025 will apply to all credit lending businesses that are required to apply for a license issued by the Consumer Credit Commission, which includes the following:
- Buy now, pay later schemes
- Leasing
- Factoring
- Islamic buy now, pay later schemes
- Islamic leasing
- Islamic factoring
The above requires a license under the Consumer Credit Act 2025, while debt collection services such as impaired loan or financing acquisition, debt counselling and management will be required to register with the Consumer Credit Commission. Licensed banks and financial institutions, insurance and takaful providers, credit card and charge card and cooperatives will not be covered by the Act. Penalties and consequences for those who operate a credit business without a license may be liable to a fine not exceeding RM5 million or to imprisonment for a term not exceeding five years, or both.
The Role of Technology in Credit Regulation
A unique feature of the Bill is its recognition of the role technology plays in shaping the credit industry. The rise of fintech platforms, peer-to-peer lending, and digital payment systems has transformed how credit is provided in Malaysia. The Consumer Credit Act 2025 ensures that these new forms of credit providers comply with the same regulatory standards as traditional lenders, promoting fairness and security in digital transactions.
A significant and forward-looking feature of the Consumer Credit Act 2025 is its recognition of the evolving role technology plays in the credit landscape. Currently, Malaysia’s regulatory framework is fragmented, with fintech platforms, peer-to-peer (P2P) lending operators, and digital credit services often falling into grey areas or being partially regulated under various laws. This regulatory gap has raised concerns about consumer protection, data privacy, and the reliability of digital lending practices.
The Consumer Credit Act 2025 aims to close these gaps by ensuring that all credit-related businesses, regardless of whether they operate online or through traditional channels, are subject to the same high standards of licensing, registration, and conduct. The Act will bring digital lenders, including fintech and P2P platforms, under the regulatory purview of the Consumer Credit Commission and relevant authorities. These entities must meet fit and proper criteria, financial requirements, and business conduct obligations similar to those imposed on banks and traditional lenders.
By doing so, the Consumer Credit Act 2025 promotes fairness, accountability, and security in digital credit transactions, ensuring that innovation in the financial sector does not come at the expense of consumer rights or systemic stability.
Conclusion
The Consumer Credit Bill 2025 marks a significant step forward in enhancing consumer protection and financial transparency in Malaysia. The Bill introduces comprehensive regulations for credit businesses and licensing requirements in the digital age. With strict penalties for non-compliance and the authority to investigate and enforce regulations, the Consumer Credit Commission aims to foster ethical conduct and fair practices within the consumer credit industry. This framework is expected to create a more robust and transparent credit market that safeguards consumer rights and promotes industry growth.
Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.
