Consumer credit law risks squeezing poorer households further, says think tank
However, its chairman Datuk Dr Pamela Yong cautioned that while the CCB is a milestone in efforts to regulate Malaysia's expanding consumer credit market, legislation alone will not resolve the structural issues pushing Malaysians, particularly the youth and informal workers, into cycles of debt.
'The Bill's introduction of a dedicated Consumer Credit Commission (CCC) to oversee previously unregulated credit providers and enhance consumer protection is a positive step,' she remarked.
'(But) without wider economic reforms, this law may unintentionally tighten credit access for low- and middle-income groups already struggling with stagnant wages, high living costs and shrinking financial buffer.'
As of December 2024, Malaysia's household debt stood at RM1.63 tril, representing 84.2% of GDP, which is the highest in Southeast Asia according to Bank Negara Malaysia.
This reflects the growing reliance on short-term credit to cope with volatile income and essential spending, especially as the economy transitions from stable industrial jobs to more precarious service roles.
At the same time, new fiscal measures such as petrol subsidy rationalisation and sales and services tax (SST) expansion have increased pressure on household budgets.
The think tank went on to warn that layering new compliance costs on credit providers may inadvertently make credit more expensive or inaccessible, especially for the very groups the law intends to protect young adults, gig workers and financially excluded households.
It also highlighted the importance of institutional clarity, regulatory independence and accountability for the CCC.
Clear frameworks must govern leadership appointments, scope of powers and stakeholder engagement to ensure transparency and public trust.
Crucially, INSAP stressed that any reform of the credit ecosystem must be matched by real structural policies that raise income security and job quality, control the cost of essential goods and services, and expand access to financial literacy and consumer rights education.
'The CCB must not become a regulatory plaster over a deeper economic wound. Without bold reforms to tackle inequality and economic insecurity, Malaysians will continue to borrow just to survive, no matter how well-regulated the system becomes,' Dr Yong added. ‒ July 25, 2025
Main image: Pexels/Anna Shvets
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