KUALA LUMPUR — With more young people in financial distress from Buy Now Pay Later (BNPL) schemes, the Credit Counselling and Debt Management Agency (AKPK) has released its “3P” formula – Purpose, Payment Capacity and Payment History – to help consumers make responsible credit decisions.
Explaining the formula, AKPK said the first P or Purpose is meant to help consumers assess whether paying on credit will bring long-term benefit, or if their purchase is merely for a temporary “want”, or even a “frivolous” lifestyle choice.
The second P, or Payment Capacity, is to guide individuals in thinking about how much they can actually afford, rather than the eligibility offered by financial institutions or BNPL schemes.
“Questions such as ‘How long is the repayment period?’ and ‘Is my income stable throughout the credit term?’ are crucial in assessing whether the debt is manageable.
“Hence, individuals should assess their income, expenses and existing debt obligations to determine their ability to repay before using BNPL schemes,” AKPK said in a statement, reported by Bernama.
The final element, Payment History, emphasises the importance of maintaining a solid repayment record.
“Keeping a strong payment history, by meeting all payment obligations promptly and avoiding warnings from credit providers, is crucial for securing favourable financing terms,” said AKPK.
Consumers should use BNPL only if they can meet all deadlines to avoid incurring late fees, interest charges, penalties for non-payment and compounding costs, the agency added.
Finance Minister II Datuk Seri Amir Hamzah Azizan told the Dewan Rakyat that there was a surge of nearly 45% in BNPL transactions in just six months from the first half to the second half of 2024.
Commenting on this, AKPK chief executive officer Azaddin Ngah Tasir said AKPK’s research showed that three out of 10 consumers, particularly those under 40, exhibited compulsive spending habits and experience higher financial distress.
“This observation is consistent with AKPK’s own research, indicating that a significant portion of consumers exhibited compulsive spending tendencies.”
“These tendencies were observed to be more prevalent among younger demographics,” Aladdin added.
“This corroborates our research on money and mental health in which we found that individuals below 40 years of age experienced higher financial distress compared to those in the higher age bracket.
“While BNPL provides a potential financial option, its perceived convenience hides the real cost,” he said.
Last year, the AKPK in a report said it found 53,000 youths aged 30 and below who are collectively in debt amounting to nearly RM1.9 billion.
In a 2023 analysis by the Consumer Credit Oversight Board (CCOB) Task Force, it was found that the country had 3.7 million people who held Buy Now, Pay Later (BNPL) accounts, and that the majority of them were young and working adults aged 21 to 45 years old.
Khazanah Research Institute, meanwhile, in an August 2024 report on BNPL transactions, said Malaysians had spent a whopping RM6.2 billion (US$1.38 billion) using such payment methods in 2023, and that nearly half of these shoppers were under the age of 30.
Malaysian Insolvency Department (MD) director-general Datuk M Bakri Abd Majid was recently reported saying fresh graduates entering the workforce do not need a credit card, and should be subject to more restrictions for credit card ownership. He said they lacked financial stability and ability to control their spending, especially with lifestyle purchases, causing them to fall into debt. – March 18, 2025