ALOR STAR: The Consumer Association of Kedah (Cake) has backed Khazanah Research Institute's (KRI) call for stringent regulations and monitoring on "buy now, pay later" (BNPL) consumer credit services.
Its president Yusrizal Yusoff said while the BNPL services provided consumers the convenience of purchasing many items, it might end up aggravating the "artificial purchasing power" issue, which would land them in financial trouble.
"Yes, the services offer convenience to consumers, but we have to study the impact on the price of goods.
"If we study the economic system, when demand increases, the price of goods will also increase.
"Hence, if we look at the credit systems, either BNPL, bank loans or easy instalment schemes, they create artificial purchasing power, whereby consumers actually can't afford to buy what they want.
"This will lead to a surge of demand, which subsequently leads to a price hike," he said.
He added that it was imperative to properly vet the consumers' ability to pay for their purchases in instalments, and how much surcharge was being imposed by the BNPL service providers.
"BNPL falls under credit services. What happens to consumers if they failed to repay the loan?
"Will they get blacklisted or be listed as a bad creditor? All these will have an impact on consumers.
"Our concern is this will lead to a significant jump in household debt levels," he said.
Yusrizal also pointed out the risk of such services in piling up the consumer debt burden as people tend to make purchases that were beyond their means.
Therefore, he said Cake fully supported KRI's call for more stringent regulations and monitoring of BNPL service providers.
"We fully support the call because if this situation is left unchecked, more consumers will be blacklisted and even worse, fall into bankruptcy," he said.
He stressed that it was paramount for consumers to be educated on financial literacy so that they truly understand the concept of living within their means.
Earlier today, KRI revealed that BNPL consumer credit services had generated RM6.2 billion in sales last year.
As such, the institute is calling for more stringent regulations and monitoring to reduce the impact that BNPL might pose on the economy, particularly household debt.