A responsible lending regulation in Malaysia and Australia with special reference to suitability and affordability assessment / Nurul Afifah Adawiyah Rafie

In recent times, irresponsible lending practices have become a major concern for many countries globally. Literature proves that lack of control of this practice will lead to negative ramifications on the individual consumer who will suffer the adverse impact of over-indebtedness and threaten the country's financial stability as well. Thus, the purpose of this study is to assess the Malaysian consumer credit industry's current responsible lending policy which includes banking, pawnbroking, hire-purchase, money lending, credit sale, and cooperatives, as the industries are subjected to fragmented regulation. This study employs qualitative research methodology. Secondary data in the form 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 Act2017, the Cooperative Society Commission Act 1993, the Guideline on Responsible Financing and the Guideline on Credit Facility for Cooperatives were rigorously analysed. A comparative study has also been adopted by comparing the responsible lending regulation in a selected jurisdiction namely Australia as this country is reputed for their consumer protection regime. A series of interviews were conducted with industry players to investigate their affordability assessment practice. The data was triangulated with literature and views of regulators, consumer associations and representatives from Credit Counselling and Debt Management Agency. This study identifies an inconsistency in the Malaysian consumer credit industry's approach to responsible lending. Banking institutions supervised by the Bank Negara Malaysia are required to adhere to the Guideline on Responsible Financing. Cooperatives are likewise required to do so pursuant to the Guideline on Credit Facility for Cooperatives. Other non-banks 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 implementing the most effective way to impose a duty and obligation on all credit providers to engage in responsible lending practices. One of the implications of this study is that the relevant regulators will give priority to devising a feasible suitability and affordability assessment regulation encompassing all consumer credit industries in Malaysia to protect the consumer against over-indebtedness. Finally, it is submitted that responsible lending practices will provide strong financial consumer protections in the Malaysian consumer credit industry.