Tighten conditions for credit cards, loans, BNPL schemes, says financial planner

 

The Credit Counselling and Debt Management Agency, or AKPK, recently announced that 53,000 individuals below 30 are burdened by nearly RM1.9 billion in cumulative debt. (Rawpixel pic)

PETALING JAYA: 

Financial institutions and other loan providers have been urged to tighten their conditions for credit cards, personal loans, and the 

buy now, pay later

 (BNPL) scheme.

This follows the revelation that over 50,000 adults below 30 are burdened by nearly RM1.9 billion in debt.

Licensed financial planner Idham Idris from Wealth Vantage Advisory said eligibility requirements should be tightened to reduce impulsive loans and encourage responsible use of credit facilities.

People usually assume it is easy to use credit cards and BNPL schemes, but this practise can lead to uncontrolled debt,

 he told FMT.

On Thursday, the Credit Counselling and Debt Management Agency (AKPK) reported that 53,000 individuals aged below 30 are burdened by nearly RM1.9 billion in cumulative debt.

AKPK also found that 28% of Malaysian working adults have had to borrow money to purchase essential goods.

Finance minister II Amir Hamzah Azizan was reported to have said that the lack of understanding of implications and the undisciplined management of commitments – on the back of the increased accessibility to loans, credit cards and BNPL schemes – was extremely worrying.

Idham said the government has started several important initiatives to tackle the problem of debt, such as a financial literacy month and a national strategy for financial literacy.

He suggested several other steps to strengthen these efforts, such as making financial literacy a mandatory part of school education.

This will help the next generation to be more prepared to face financial challenges when they enter the working world,

 he said.

Idham also suggested mandating financial literacy tests for loan applicants to ensure they truly understand the responsibilities and risks involved.

This will reduce the number of unnecessary loans, especially among young adults who have just started working,

 he said.

Idham called for AKPK to be strengthened so that they could offer early intervention programmes to youth who are at risk of falling into debt.

This can include mandatory financial counselling sessions before applicants are allowed to take out loans, especially for high-risk financial products like BNPL schemes,

 he said. - FMT