The Malaysian House of Representatives (Dewan Rakyat) passed the Consumer Credit Bill 2025 (‘the Bill’) on 21 July 2025. This piece summarises its implications on the consumer credit landscape in Malaysia.
[The Bill is accessible from the official website of Malaysia’s Parliament (click here and search for code D.R.14/2025)]
Executive Summary
The Bill seeks to streamline domestic laws concerning the provision of consumer credit.
Under existing laws, there is no uniform definition of a consumer credit agreement. Regulation was dispersed and varied across laws administered by different regulatory authorities. As a result, many consumers are confused of their rights. This has bred an environment where credit providers in the ‘informal lending’ sector can take advantage of unsuspecting individuals.
The Bill seeks to stamp out these issues by (i) establishing a single definition of credit consumers which extends to social guarantors – something which was lacking under pre-existing laws; and (ii) introducing minimum entry requirements for all credit providers who offer credit to consumers (i.e. credit consumers). The scope extends to Islamic credit businesses such as Islamic pawnbroking or Islamic hire-purchase. Imposing licensing requirements across the board for credit providers makes it easier to identify credit providers who are authorised to offer credit contracts as well as in monitoring their operations.
Policy makers have also set their sights on improving the regulation of debt collection agencies by bringing these under the definition of credit service providers, all of whom must be registered with the relevant regulatory and supervisory authorities under this Bill and subject to similar business conduct and consumer protection requirements in their dealings with credit consumers.
Once licensed or registered, these entities are subject to strict business conduct requirements in their dealings with credit consumers through (i) disclosure and transparency obligations; and (ii) prohibition of certain conduct such as inducing consumers to enter into a contract or making false and misleading statements (see Schedule 6 of the Bill).
Those intending to escape these rules by contract terms, i.e. contracting out of the law, are prevented from doing so under section 3 of the Bill. Once the Bill becomes law, it will offer a much-needed uniformity across the consumer credit landscape.
Compliance & Enforcement
From an enforcement perspective, the Bill equips regulators with a range of measures that can be taken to ensure compliance with the law utilising modern enforcement tools such as administrative monetary penalties, direct certain conduct be taken and removing directors or senior management, all of which can be imposed summarily by regulators.
Conclusion
The Bill signals a progressive step towards establishing a more consumer friendly credit industry, affording greater protection to consumers and reducing opportunities to take advantage of credit consumers. Such policies are likely to better inform credit consumers of their rights and remedies, simultaneously forcing credit providers to employ higher standards of business conduct; or as the overarching statement provided for in the Bill coins it: to carry on business “in a fair, responsible and professional manner when dealing with consumers” (section 84 of the Bill).
Click here for a more substantive write-up on the Bill.
For further advice on this area, please contact Nigel William Kraal at nigelwk@cheangariff.com
Disclaimer: The contents of this write-up is intended for general informational purposes only and does not constitute legal advice.
