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Consumer Credit Act

Briefing to Suruhanjaya Koperasi Malaysia

27 April 2017
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Agenda

1. Background to Consumer Credit Act (CCA)

2. Coverage and benefits of the CCA

3. Work plan and deliverables

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Overall credit landscape in Malaysia
(includes corporate loans)
Credit sales
(KPDNKK)
Banks*
MBSB* PTPTN
(RM29.7 b as at (RM32.2 b as at Moneylenders Islamic
Oct 16) Sept 16) (KPKT) banks*
Coop-
(3,629 cos., RM2.82 b
for 2015)
banks DFIs under
Leasing and Other DFIs Ar-Rahnu & Peer-to-peer DFIA*
factoring Shariah-based lending
companies credit providers Insurers/ &
Credit
coops Takaful
Pawnbrokers Operators*
MARA JPA Yayasan (KPKT)
(477 cos., RM 5.78 b Credit card
Amanah Ikhtiar TEKUN for 2015) issuers*
Malaysia Nasional
Hire purchase*
(KPDNKK)

Not regulated

*Total household debt as at end-Oct 2016: RM1 trillion. For hire purchase companies under the purview of KPDNKK, only
companies with significant transaction values are included in the computation

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Current consumer protection landscape is fragmented

1 2 3 Lack of inter-agency
Lack of visibility of Gaps in consumer
consumer credit protection coordination
issues requirements

Need better Different level of Activity-based rather

information gathering protection for consumers than outcome-based
Data regulatory framework
Practices/ Lack avenue for redress
problems Less responsive to
Some segments not developments
regulated
Concern on
household debt

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Recent trends to align regulatory treatment of consumer
credit
UK South Africa Australia New Zealand
1974 Office of Fair Trade National Credit Australian Securities Commerce
2014 - Financial Conduct Regulator (Dept. of & Investments Commission
Authority (FCA) (Treasury) Trade and Industry) Commission (ASIC)
(Treasury)
Bills of Sale Act Usury Act Uniform Consumer Credit Contracts Act
Moneylenders Act Credit Agreements Credit Code Hire Purchase Act
Hire Purchase and Small Act State-based
Debts Act consumer credit
Pawnbrokers Act codes

Shift away from product-based

regulatory framework

Consumer Credit Act National Credit Act National Consumer Credit Contracts and
1974 / Financial Services 2005 Credit Protection Act Consumer Finance Act
and Markets Act 2000 2009 2003 (Amended 2014)

Create a unified system of statutory regulation national consistency

o Ensure credit providers are fit to run credit business
o Reinforce responsible lending
o Effective and efficient dispute settlement
Advance social and economic welfare balancing needs of both consumers and providers

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CCA as a catalyst in changing consumer credit landscape

Entry requirement and

Equitable
data gathering
financing
Credit charges
agreement, Suitability &
Shariah-based advertising & affordability
transactions solicitation assessment

Examination,
Establishment of investigation, CONSUMER
PROTECTION Fair debt
National Consumer offences &
AREAS collection
Credit Council (NCCC) administrative
penalty
Coordination and
Consumer
alignment of national complaints and
policies and strategies Debt Hardship
dispute
settlement counselling
Cooperation in agencies and
supervisory and management
enforcement activities plan

Collaboration in
capacity building

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CCA to address issues affecting consumers at every stage

of a credit product life cycle
Fair Contract Fair Conduct

Product life Product After Point Customer

Product Distribution
cycle Design of Sales Redress

Key
Credit Advertising, Equitable Suitability & Fair Relief Complaints
consumer agreement solicitation financing affordability debt from and dispute
protection & disclosure charges assessment collection hardship settlement
areas

Unfair Misleading Excessive Unsuitable Unethical No or lack Delays in

contract promotion fees & product tactics by of complaints
Possible terms materials charges debt assistance Complaints
elements of Unethical or collectors, for not properly
unfairness aggressive repossessi borrowers investigated
in dealings sales tactics on agents facing and handled
Forced/tied financial fairly
with
selling hardship
consumers Inadequate
disclosure
of product
risks

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Regulatory authorities will also benefit from more

effective and efficient supervision of credit providers

Policy coordination
Sharing of information on 1 Efficient 2 Joint surveillance and
key trends and coordination enforcement activities
developments in consumer platform via Effective and Sharing of supervisory
credit landscape NCCC to deal efficient tools and framework
Exchange of best practices with issues surveillance
relating to and
Joint public education
consumer supervision
initiatives
Collaborate in credit
enhancements to
legislative framework
Pooling of resources
Capacity Infrastructure for development of
building development information systems for
Joint training initiatives data capturing
Collaboration on industry Accelerate progress
events and towards more efficient
engagements 4 3 regulatory process
through automation

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In transitioning to the CCA ...

Existing laws related to consumer credit

Hire Purchase Act Moneylenders Act Financial Services

Consumer Act 2013,
Protection Act 1967 1951
Islamic Financial
1999, Consumer Services Act 2013
Protection (Credit Co-operatives and Development
Sale) Regulations Pawnbrokers Act Societies Act Financial Institutions
2012 1972 1993 Act 2002

Alignment
of consumer
protection
standards

Consumer Credit Act

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Establishment of inter-agency platforms to develop the

CCA framework
Inter-Agency Steering Committee (IASC)

BNM KPDNKK KPKT

Plays an oversight role in driving the achievement of specified functions

Supported by

Technical Working Group (TWG)

competent authorities that supervise consumer credit activities

BNM KPDNKK KPKT SKM JAKIM AGC

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Where we are now

Nov 16 Jan 17 23 Jan 17 13 Feb 17 2 Mar 17 March - April

Stakeholder 1st SC meeting 2 TWG meetings Briefing to

engagements Establishment Policy discussion on: Ministers
KPDNKK, of SC and (KPDNKK,KPKT,
Regulatory architecture
KPKT, JAKIM, Technical KKM)
Securities Authorization
Working Group Fully support
Commission (TWG) Scope of coverage CCA initiative
Recognised Broad Governance structure
benefits of discussion on Advertising and solicitation
CCA initiative key policy
Credit agreement
Agreeable to areas
joint initiative Feedback on first four parts of the
Authorisation
draft Consumer Credit Bill
Scope of
Preliminary
coverage
Objectives And Functions Of
Governance
Competent Authority
structure
Administration and Governance
Authorization

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Work plan and deliverables

TWG & IASC meetings draft CCA and align existing laws

May June July Aug - Oct Nov

Cabinet Publish Draft Finalise Brief AGC Cabinets

Paper Bill for draft Bill ministers review approval
To obtain public for (firm up draft Bill for tabling
mandate to consultation submission decisions if to
enact CCA (for 1 month) to AGC substantive Brief MPs Parliament
Public issues
consultation following
and dialogue consultation)
with
association,
NGOs,
agencies etc.

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Thank you

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