BUY Now Pay Later (BNPL) has become a global phenomenon. The Malaysian BNPL industry has seen rapid growth in line with international trends. Its popularity is attributed to marketing as an interest-free way to pay by instalments, easy access via digital platforms, and seamless integration with merchant sites at the point of purchase. Yet, BNPL has raised concerns over risks of falling into unmanageable debt.

To curb the risks of harm, the Consumer Credit Act 2025 was introduced — a first for Asean, and a potential model for the region. The new laws are aimed at safeguarding credit consumers through licensing of BNPL providers, transparent disclosure of information, affordability assessments, and fair debt collection. Credit providers must have complaint handling mechanisms and consider hardship assistance. The Consumer Credit Act 2025 envisages that regulatory guidance may be issued to better protect vulnerable consumers.

New research from Monash University illuminates how Malaysia’s burgeoning regulatory framework can further be enhanced to meet the needs of people experiencing vulnerability. Regulators from countries with progressive consumer credit frameworks commonly draw insights from consumer behaviour to shed light on the interventions that regulators can implement to effectively mitigate harm. Drawing on empirical data collected by the author, including a survey of 400 BNPL consumers, focus groups with young adult BNPL users and an interview with staff from the Consumers Association of Penang, the study explores the challenges faced by Malaysian BNPL consumers.

The study revealed the need for user-friendly disclosures that clearly display late-payment fees upfront. Over a third (35.5%) of consumers surveyed had difficulty paying instalments on time, and 83.3% who missed a payment incurred fees. More than one in five who missed scheduled payments did not know they would incur fees, while 46.5% of consumers who incurred fees were charged more than expected.

Focus group participants noted a tendency to act on readily available, conspicuous information. They remarked that BNPL providers’ websites displayed ‘zero interest’ boldly, while they had to search for information on late fees, which were often in small, dense print on different webpages amid large amounts of information. They described fee disclosures as ‘lengthy’, ‘too wordy’, ‘very confusing’, noting that ‘people can be lost in the terms’. An interviewee explained that they mostly ‘just want to check out really fast, so we don't really click on the terms and conditions and read through all the late payment charges.’

Research suggests that information overload leads consumers to ignore the fine print. The use of such website layouts is contrary to best practice for effective risk disclosure. Judicial decisions emphasise that consumers shouldn’t have to find their way to the truth past misleading claims. To alleviate this, regulatory guidance can specify that late fees and other costs must be disclosed clearly, upfront, in a user-friendly way. 

For example, they could incorporate a cost calculator that displays instalment amounts and the fees for missed payments before consumers sign up. Risk warnings should be mandated across the full range of digital interactions used by credit providers, including phone apps and BNPL payments on merchants’ sites.

Recent reports indicate that more than 70% of BNPL users are lower-income consumers (B40), and BNPL is often used for food, groceries, transport and services. The Monash University survey similarly found that 40.3% of respondents used BNPL for necessities such as groceries, school uniforms and other school equipment or telephone expenses. The survey also found that 49.3% of respondents used BNPL because they did not have enough money. BNPL use without the capacity to repay draws consumers deeper into debt, as they incur late fees, aggravating financial hardship. 

About 43.7% of survey respondents said that they experienced hardship as a result of late fees. Like BNPL consumers in other countries, many consumers ended up paying fees or interest, at times on their credit cards, despite the promise of ‘zero fees.’ Worryingly, a quarter of respondents were contacted by debt collectors, raising concerns among consumer advocates who described harmful debt collection practices.

For consumers with debt problems, free debt management offered by Agensi Kaunseling dan Pengurusan Kredit (Credit Counselling and Debt Management Agency) would offer better long-term solutions than BNPL. However, consumers don’t have access to the agency’s services for non-bank credit. Extending free debt management services to all credit consumers would improve outcomes for consumers experiencing vulnerability. 

Likewise, enabling access to the Financial Market Ombudsman Service (FMOS) would also foster a more supportive ecosystem for vulnerable credit consumers. At present, the FMOS is restricted to disputes with financial service providers regulated by Bank Negara or capital markets intermediaries.

The new laws require credit providers to consider financial hardship. Yet, providers have discretion to decide what assistance to give, and may refuse to vary the contract. Allowing credit consumers to seek a remedy through the free ombudsman service when BNPL providers don’t meet the standards prescribed by the new rules, or give due consideration to hardship, will facilitate access to justice and foster greater accountability.

Affordability assessments are a double-edged sword. While they help prevent consumers from becoming over-indebted, for people experiencing chronic poverty who rely on credit to pay for basic food, the new laws could have unintended consequences, excluding them from licensed credit and driving them to illegal moneylenders who pose a greater risk of harm or destitution.

To avoid unintended consequences, the underlying problem of poverty needs to be addressed. Social security is fragmented and inadequate, falling short of the average for middle-income countries. As rising living costs leave many struggling to make ends meet, the need for creative solutions is all the more urgent. 

These may include interest-free loans and accessible food banks, potentially delivered through charities working hand in hand with corporate social responsibility initiatives, and better social protection to enable people experiencing vulnerability to meet their basic daily needs.

Associate Professor Vivien Chen teaches commercial law at Monash University, specialising in consumer credit, corporate governance and social responsibility.