Evaluating Responsible Lending Framework Through Suitability and Affordability Assessment in Malaysia

Abstract

The purpose of this study is to assess the Malaysian consumer credit industry's current responsible lending policy which includes banking, pawnbroking, hire-purchase, moneylending, credit sale, and cooperatives, as industries are regulated separately. This study employs a doctrinal legal research methodology and content analysis of primary and secondary sources of law, including the Financial Services Act 2013, the Moneylenders Act 1951, the Pawnbrokers Act 1972, the Hire Purchase Act 1967, the Consumer Protection (Credit Sale) Regulations Act 2017, the Cooperative Society Commission Act 1993, the Guideline on Responsible Financing and the Guideline on Credit Facility for Cooperatives. This study identifies an inconsistency in the Malaysian consumer credit industry's approach to responsible lending, as banking institutions supervised by the Central Bank of Malaysia are required to adhere to the GRF, while others are not legally required to conduct mandatory suitability and affordability assessments. To avoid the issue of inconsistency, this study proposes some recommendations which will assist policymakers in deliberating the most effective way to impose a duty and obligation on all credit providers to engage in responsible lending practices.