Frequently Asked Questions
Consumer Credit Law
The law is targeted for tabling to Parliament in the first quarter of 2025.
CCOB
The CCA will be administered by the Consumer Credit Oversight Board (CCOB), an independent competent authority, set up under the Ministry of Finance (MOF).
The CCOB is responsible to, among others:
a) Authorise and supervise persons carrying on credit business and credit service business;
b) Promote and enforce proper conduct among credit providers and credit service providers;
c) Encourage and promote the orderly development of the consumer credit industry.
This means that the CCOB will leverage on digital technologies in its operations to bring about better efficiency for industry players. Technology will also be applied in educating and creating awareness to all segments of society.
Authorization, Governance and Conduct Standards
Multiple licensing will be required. The said entity will be required to apply for licence/registration from CCOB for each type of credit business or credit service business that falls under the scope of CCA. In Phase 1, before the transfer of regulatory powers from KPKT and KPDN to CCOB, entities wishing to carry business such as money lending or pawnbroking are still expected to seek license from respective regulatory authority.
An online crowdlending platform service means the activity of operating an electronic platform that facilitates, directly or indirectly, the lending or financing of credit to a credit consumer. For the purpose of the CCA, a P2P lending operator currently registered with the SC would not be required to apply for registration with the CCOB as an online crowdlending service provider or as a moneylending service provider. The SC, being one of the RSAs, will exercise supervisory oversight and enforcement of the CCA on the P2P operators in relation to the carrying out of such activities.
Authorisation is a one-off process involving digital submission and engagement(s), with CCOB striving to respond with its decision within a 3-month timeframe subjected to a complete submission of the required information.
No, you don’t. Licence or registration granted will continue to be valid unless revoked, suspended, registrant is de-registered, or when the said business has ceased. Licensed or registered persons are expected to pay an annual fee throughout the validity of the licence/registration.
Revocation/suspension/de-registration may occur when there is a failure to comply with CCA provisions/regulations/standards on matters such as below:
• Non-payment of annual licence/registration fee
• Non-compliance with financial, governance, conduct, and reporting obligations
• Failure to satisfy fit and probity requirements of key personnels
CCOB’s regulatory fees are based on the following three areas:
• Admission: Non-refundable processing fee for new license/registration applications.
• Maintenance - Regulatory Services: Fee will be proportionate, taking into account the entity’s business performance i.e. income/revenue. This annual fee would partly defray CCOB’s regulatory and supervisory costs (e.g. systems and online portals, surveillance and supervision work, awareness and education programs etc.).
• Regulatory Compliance - Deterrence Fee: Fee to review/assess applications for waiver/variations or extension of time. This is to strengthen industry discipline and level of compliance.
No. Licensed or registered entities are not allowed to transfer/sell/lease their license or registration to any other person. Any proposed corporate activities (amalgamation/merger) require CCOB or the relevant RSA's prior approval.
In order to hold yourself out as carrying on Islamic credit business, the business has to comply with Shariah requirements throughout its operational/business value chain.
No, all entities that intend to carry on credit consumer activities in Malaysia need to be incorporated locally.
The determination of fees and charges is a commercial decision which the CCOB usually will not intervene. Nevertheless, CCOB will apply oversight where fees and charges affect credit consumer protection areas such as whether there are excessive or unreasonable fees and charges imposed to credit consumers.
Business Conduct and Credit Consumer Protection Area
Affordability Assessment
Yes, all non-bank credit providers are expected to undertake affordability assessment when giving credit to individuals.
They must ensure that borrowers have the ability to fully repay the debt without resulting in undue financial hardship throughout the credit tenure.
Fair Debt Collection
No. However, a credit provider/credit service provider must ensure that the debt collection agency is registered with the CCOB.
Complaints Handling
Any aggrieved credit consumer may lodge a complaint against a credit provider/credit service provider via the system. This portal will be interoperable with credit provider/credit service provider’s internal complaints handling system which allows the sharing of information, engagement and coordination between the CCOB and the respective RSAs on complaints involving multiple regulatory agencies.
All credit providers and credit service providers should establish and implement a comprehensive complaint handling process which includes having a dedicated point of contact widely accessible, to handle complaints from credit consumers.
[Note: The CCOB is developing a one-stop complaints management system (CMS) to enable credit providers/credit service providers to receive complaints from credit consumers. CMS will be interoperable with credit providers/credit service providers’ internal complaints handling systems. Any credit provider/credit service provider without a fully developed internal complaints handling system may use this system to handle complaints.]
Updates to Hire Purchase
The proposed enhancements will only apply to new hire
purchase contracts signed after the relevant provisions in the
revised Hire Purchase Act 1967 (“HPA”) is enacted and comes
into effect. Existing borrowers will continue to be bound by the
terms of their existing hire purchase contract.
The prohibition is aimed at ensuring fairer outcomes for
borrowers, particularly for those who settle their loans early.
a) The Rule of 78 method of calculation frontloads the interest
payment to the beginning of the loan tenure, meaning a
higher portion of a borrower’s loan repayments will go
towards paying interest than the principal balance.
Borrowers who wish to pay off their loans early will be faced
with a higher principal amount outstanding compared to
other methods of calculating interest payment.
b) The flat rate method is unfair to borrowers as throughout the
loan tenure, borrowers are charged interest based on the
original principal amount they borrowed, rather than on the
outstanding amount that they still owe, which reduces with
each repayment. This results in borrowers paying much
more interest compared to loans that charge interest based
on the reducing balance method.
The Rule of 78 method is recognised globally to be unfair to
borrowers. The practice is prohibited in jurisdictions such as
Australia, New Zealand, United Kingdom (UK), and some states
in the United States of America (USA). The offering of flat rate
loans is also prohibited in Australia and New Zealand. In
jurisdictions such as UK and USA, the offering of flat rate loans is only permitted where the interest charged is equal to or lower
than the interest charged under the reducing balance method.
The reducing balance method will be used by hire purchase
providers to calculate interest. This method involves charging
interest on the outstanding balance of the loan each month,
which means that as the borrower pays off the loan, the amount
of interest charged also decreases over time, resulting in fairer
monthly repayments throughout the tenure of the loan.
If a borrower settles their hire purchase loan early under the
reducing balance method, the remaining amount to be repaid at
the point of early settlement will be lower compared to the Rule
of 78 method. For example, housing loans that are offered by
financial institutions are based on the reducing balance method.
Yes, hire purchase providers will still be offering fixed rate loans.
Moving forward, borrowers will still have the option to sign up for
a fixed rate or variable rate hire purchase loan. The benefit of
signing up for a fixed rate loan is that the interest rate imposed
is fixed and will remain the same throughout the loan tenure
compared to a variable rate loan which may seem “cheaper”
when the overnight policy rate is low as the interest rate will also
reduce. However, the loan will become more “expensive” once
the overnight policy rate increases as the interest rate will also
increase accordingly.
Yes, there is. Since 2005, hire purchase providers are prohibited
from charging an interest rate higher than 10% per annum for
fixed rate loans, and 17% per annum for variable rate loans. The
maximum rates are prescribed in the Hire Purchase (Term
Charges) Regulations 2005 and the maximum rate for fixed rate
loans is provided for in nominal rate terms.
A nominal interest rate is essentially the stated or advertised
interest rate on a loan by hire purchase providers to borrowers,
before taking into consideration compounding interest and other
fees and charges. Hence, the nominal interest rate may appear
to be lower than the Effective Interest Rate (“EIR”). The proposal
for both the maximum rates to be streamlined to EIR not
exceeding 17% per annum in paragraph 20.8(c) of the CP2 does
not intend to change this cap (see further explanation in the
answer to Question 7 below).
EIR is a rate which reflects the actual interest that borrowers pay
to lenders after taking into account the compounding effects
along with any other fees and charges that the nominal interest
rate ignores. As such, EIR reflects the true cost of a loan
throughout the loan tenure. When shopping for loans, borrowers should look out for the EIR for better comparison of rates offered
by hire purchase providers.
The maximum rate for hire purchase loans which should not
exceed an EIR of 17% per annum as proposed in para 20.8(c)
of the CP2 is no different from the maximum nominal interest
rate prescribed for fixed rate loans upon conversion to EIR, and
the current rate prescribed for variable rate loans in the Hire
Purchase (Term Charges) Regulations 2005.
Moving forward, the maximum threshold will be expressed as
EIR to provide borrowers a more accurate reflection of the actual
costs of the loan being offered by hire purchase providers. In line
with this, hire purchase providers will also be required to disclose
the interest rate charged for their loan offerings in EIR. This is
because the current nominal rate advertised by hire purchase
providers may mislead borrowers into thinking a hire purchase
loan being offered is “cheaper” than it actually is. This is
illustrated in Table 1 under para 20.6 of the CP2.
Setting the maximum threshold and requiring hire purchase
providers to offer hire purchase loans based on EIR will improve
consumers’ ability to shop around, compare and select the
product offering that best meets their needs.
When a borrower settles their hire purchase loans earlier than
the contracted loan tenure, hire purchase providers would waive
the allocated interest payments for the remaining months. This
is commonly understood as a “rebate” or “discount”.
With the revised HPA, there will be no such waiver as fixed rate
and variable rate loans uses the reducing balance method for
interest calculation, where the amount of monthly interest
payment is calculated based on the outstanding loan balance.
Once the borrower pays all the outstanding balance, there is no
more interest to be accrued and hence there will be no “rebate”
or “discount”.
executing and varying hire purchase agreements?
No, it will only be an option available to hire purchase providers
to adopt. The revised HPA will still allow the acceptance of hand
signature as well as enable the acceptance of digital and
electronic signature as a way for hire purchase providers to
execute or vary hire purchase agreements. This is intended to
facilitate and ease the process for hire purchase providers
without having to execute or vary hire purchase agreements in
person or via hardcopy only.