Young Malaysians’ US$1.3bn short-term credit spree sparks warning over bad debt

Malaysians aged 30 and below bought some 5.4 billion ringgit (US$1.32 billion) worth of goods and services on short-term credit in the first half of this year, the country’s Finance Ministry has revealed.

The ministry said it had recorded 65.9 million “buy now, pay later” (BNPL) purchases among younger consumers in the first six months of 2026 – equivalent to more than one in three, or 37.9 per cent, of total purchases nationwide.

As of June 30, the outstanding BNPL financing balance among this age group stood at 2.4 billion ringgit, it said. Some 96.8 million ringgit, or 4 per cent of the outstanding balance, was classified as non-performing or unpaid.

The ministry said that industry regulator the Consumer Credit Commission strictly required BNPL providers to conduct creditworthiness checks and affordability assessments before extending lines of credit to young customers.

“These assessments must take into account the consumer’s overall financial commitments, including existing credit facilities from both bank and non-bank providers, as well as any new facilities being applied for,” the ministry said in a written reply published on parliament’s website on Tuesday evening.

Thorough checks were crucial to ensure loans aligned with young people’s ability to repay, it said.

“Excessive and uncontrolled use of multiple BNPL facilities simultaneously could lead to high repayment commitments and severely impact consumers’ financial standing,” the ministry warned.

BNPL services are currently regulated under Malaysia’s Consumer Credit Act 2025, which mandates compliance with fair and responsible lending standards set by the Consumer Credit Commission.

The ministry was responding to a question from Alias Razak, a Perikatan Nasional lawmaker for Kuala Nerus, regarding the commission’s measures to safeguard young people from falling into excessive debt.

In a separate written reply to Howard Lee, a Pakatan Harapan lawmaker for Ipoh Timur, the ministry said BNPL providers were not legally required to freeze payment demands and late fees while investigations into unauthorised transaction disputes were ongoing.

“Disputed transactions must first be investigated to determine whether unauthorised activity occurred,” it explained, adding that providers were nonetheless required to resolve complaints fairly, transparently and promptly.

To safeguard users, the commission’s standards call for robust security controls, including mandatory identity verification and a “kill switch” feature that enables consumers to immediately freeze their accounts if they suspect fraud or identity theft.

The ministry added that consumers would not be held liable for losses from unauthorised transactions if the breach was caused by systemic failures or security oversights on the provider’s end.