Bank Negara warns users to buy now and pay later against risk of overspending and ‘considers’ soon regulating the sector

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For now, the central bank has advised consumers to exercise caution and make informed decisions when using BNPL schemes, paying particular attention to terms and conditions, especially with respect to fees and charges. . — Photo by Yusof Mat Isa

By Syed Jaymal Zahiid

Wednesday 06 July 2022 07:00 MYT

KUALA LUMPUR, July 6 – Bank Negara Malaysia (BNM) is working with relevant agencies to address concerns that buy-it-now-pay-later schemes could incentivize consumers to spend beyond what they can afford enable, including through public education.

Despite its exponential growth, with market researchers estimating a trading volume of over RM2 billion this year alone, the BNPL sector is unregulated. The program’s growth was mainly helped by the pandemic, as Covid-19 restrictions forced shoppers to go online and seek discounts.

“While BNPL systems generally allow customers to make payments for purchases in interest-free installments, consumers should be aware that other charges may be levied (for example, processing fees and late fees payment),” the central bank said in a response to questions. by Malaysian courier.

“In some cases, the total fees collected by BNPL’s providers from customers may be greater than the total interest and fees charged by traditional lenders for products such as credit cards,” he added. .

BNPL programs offered by non-bank operators do not currently fall under the regulatory jurisdiction of the BNM or any other regulatory agency.

But the Ministry of Finance and the Securities Commission are currently leading interagency efforts to enact the Consumer Credit Act (CCA) in 2022, which will also result in the creation of the Consumer Credit Supervisory Board (or CCOB). ), noted the regulator.

“The CCOB will eventually serve as the single conduct authority for all consumer credit activities, beginning with those offered by credit providers that are not currently regulated by any authority, such as BNPL programs offered by operators non-banks,” the BNM said.

There are currently nearly a dozen BNPL service providers in the Malaysian market, with more expected to join. Market analysts said banks and other traditional credit providers are already working on developing their own BNPL program and may soon join the fray.

In wealthier economies, the BNPL sector has come to the attention of regulators following reports that many of its major players have taken on massive debt.

BNM said that with the enactment of the CCA, non-bank suppliers to BNPL are “envisaged to be subject to appropriate regulatory requirements, including responsible lending practices to mitigate the risk that BNPL will be offered to customers who do not are unable to repay”.

“These vendors will also be subject to expectations around consumer protection, risk management and Shariah compliance,” he added.

“For BNPL programs offered by or in partnership with banking institutions, banking institutions are required to observe practices consistent with existing responsible lending requirements.”

For now, the central bank has advised consumers to exercise caution and make informed decisions when using BNPL schemes, paying particular attention to terms and conditions, especially with respect to fees and charges. .

Users are also encouraged to pay installments in full and on time to avoid penalties, while keeping track of BNPL commitments for proper debt management.

“They can easily add up if they’re not careful,” the bank warned.

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