KUALA LUMPUR, Dec 30 — Buy Now, Pay Later (BNPL) schemes can affect credit risk scores and loan qualifications, Federation of Malaysian Consumers Associations (FOMCA) chief executive officer (CEO) Dr T Saravanan said.

The impact on consumer financial records would depend on how the data is reported, he added.

“BNPL use can influence a consumer’s credit profile depending on how the data is recorded in the credit reporting system that acts as a reference for lenders,” he said when contacted by Bernama recently.

Thus, timely payments are required to reflect good financial behaviour on the part of the borrower, as late payments or failure to repay signal higher risk in the credit market, he said, pointing out that BNPL arrears can affect applications for housing, vehicle or personal loans as financial institutions assess monthly commitments and the borrower’s repayment patterns.

“Even though not all ‘large’ loans view BNPLs the same way, the reality is that banks will assess monthly commitments and arrears that increase commitments and show cashflow pressures,” he added.

In a practical sense, BNPL records will be counted when they appear in credit check sources and when the commitment affects the debt service ratio and borrowers’ ability to pay, Saravanan said.

“With the new framework that makes it mandatory for BNPL providers to report consumer credit data to the Credit Reporting Agency (via centralised databases), financial institutions will have an easier time looking at BNPL patterns of use and borrower payment performance as part of their risk assessments,” he said.

He also pointed out that BNPLs carried the risk of uncontrolled spending, as the structure of small instalments created the illusion of affordability and encouraged impulsive buying, especially when consumers were juggling multiple BNPLs at the same time.

Consequently, FOMCA is stressing the need for more practical financial education and structural protection such as clear terms, stricter assessment of repayment ability and effective complaints mechanisms to manage the risks of BNPL use, especially among youth.

Meanwhile, university student Nur Izzaty Yasin, 23, said BNPLs helped users buy necessities without needing to pay in full at once but admitted to having difficulties repaying instalments previously due to weak financial planning, resulting in additional charges from late payments.

BNPL users must have strong financial planning to avoid such issues, she stressed.

Quality control operator Muhammad Adib Muhammad, 40, shared that BNPLs help reduce his financial burden when buying his children’s school supplies.

“I do save up part of my monthly salary to buy my children’s school supplies but it isn’t enough to cover everything. So BNPLs do help me out a bit in buying school shoes, uniforms and stationery,” he said.

He added that he planned his expenses and only resorted to BNPLs if necessary to avoid having problems with repayments. — Bernama