Perspectives of consumers, licensed moneylenders and regulator on consumer protection in the moneylending transaction system in the Klang Valley, Malaysia
In Malaysia, the moneylending industry is regulated by the Moneylenders Act 1951. Licensed moneylenders have supported the funding needs of consumers who do not qualify for personal loans from the banking sector. Nevertheless, consumer protection in moneylending transactions is hampered by con...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
2021
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/98839/1/FEM%202021%208%20IIR.pdf |
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| Summary: | In Malaysia, the moneylending industry is regulated by the Moneylenders Act
1951. Licensed moneylenders have supported the funding needs of consumers who
do not qualify for personal loans from the banking sector. Nevertheless, consumer
protection in moneylending transactions is hampered by consumers’ weak self-protection in exercising their rights and responsibilities coupled with the poor self-regulation of moneylenders in adhering to the rules and regulations.
The research framework was developed using the Consumer Decision Process
Model by Engel-Blackwell-Miniard and Public Interest Theory of Regulation by
Hantke-domas. A phenomenological study was undertaken to understand the
experience of consumer protection in the licensed moneylending industry from the
perspective of three key stakeholders namely consumers, licensed moneylenders
and regulator. Primary data were collected in the Klang Valley using face-to-face
interviews involving fourteen borrowers, twelve licensed moneylenders, and four
officers from the Ministry of Housing and Local Government responsible for
overseeing moneylenders.
The first research objective on consumer experience in the pre-moneylending
contract information search and evaluation process unveiled that borrowers
protection is unsatisfactory since they are reluctant to search for accurate
information from the right sources related to moneylending. Meanwhile, licensed
moneylenders pay less attention to consumer protection aspects. Compared to
consumers, licensed moneylenders have more advantages because they choose customers carefully and rely on referrals from borrowers to promote their business.
The regulator opined of having fulfilled its role in giving information to the
consumers, monitoring the moneylenders and enforcing the law. However, these
efforts are found to be insufficient for protecting consumers.
The second research objective regarding the process of moneylending contract
discovered that consumers’ poor decisions in the moneylending transaction were
due to little awareness of their rights and duties. The licensed moneylenders had a
better bargaining position as they were more aware of their rights and duties with
regards to the moneylending contract. Thus, there exists an unequal bargaining
power favouring licensed moneylenders and discriminating against the borrowers.
Meanwhile, the regulator took a non-involvement role since the contract is between
the borrower and the lender based on the freedom of contract principle. This action
does little to support consumers’ protection.
The third research objective on the moneylending complaints and complaint
avenues found that consumers effort for self-protection is stalled as they were
fearful and reluctant to complain against the licensed moneylenders. Borrowers'
dissatisfactions were mainly on high-interest rates, not having a copy of the attested
moneylending contract, not knowing who and where to complain. Furthermore,
from the licensed moneylenders' findings, there were no direct complaints from
their borrowers. It was discovered the regulator had limited powers to act on
moneylending complaints due to inadequate evidence given by the borrowers
which contributes to poor consumer protection.
The fourth research objective in recommending consumer protection enhancement
in the moneylending transaction system is by increasing consumers’ knowledge
and the requirement of moneylending process. Moreover, the recommendation for
licensed moneylenders is to embrace ethical business conduct, Moneylenders Act
1951 compliance and represented by a strong and unified association. The regulator
is recommended to conduct more educational programs for consumers and licensed
moneylenders with enhanced enforcement and redress mechanism. The
implications from the research findings intensify the importance of the refinement
of consumer self-protection, the enhancement of licensed moneylenders’ self-regulation and the advancement of consumer protection by the regulator. Besides
theoretical and policy implications, this study provides important methodological
implications. Suggestion for future consumer protection research is also elaborated. |
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