KUALA LUMPUR: The Credit Counselling and Debt Management Agency (AKPK) has introduced the 3P formula – Purpose, Payment Capacity and Payment History – to guide individuals in making responsible credit decisions, particularly in short-term financing like Buy Now Pay Later (BNPL).
AKPK, in a statement today, emphasised that the agency is committed to empowering individuals with the knowledge and tools to manage their finances responsibly, besides helping them evaluate their financial capacity and avoid excessive debt.
“In term of Purpose, AKPK emphasises the importance of borrowing for beneficial and sustainable purposes to fulfil needs that provide long-term benefits, rather than satisfying temporary wants or frivolous lifestyle choices while Payment Capacity lets individuals borrow according to their actual affordability, rather than solely based on the eligibility offered by financial institutions (or BNPL schemes, in this case).
“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,” it said.
Regarding the final element, Payment History, AKPK stresses 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.
According to the statement, AKPK acknowledges the potential risks associated with BNPL, where the ease of purchase can mask the long-term financial implications.
Finance Minister II Datuk Seri Amir Hamzah Azizan told the Dewan Rakyat that there was a surge of nearly 45 per cent in BNPL transactions in just six months from the first half to the second half of 2024.
Commenting on this issue, 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. While our findings revealed that approximately three out of 10 consumers demonstrated such behaviour, these tendencies were observed to be more prevalent among younger demographics.
“This corroborated 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.
AKPK also advises people to use BNPL only if they can meet all deadlines to avoid incurring late fees, interest charges, penalties for non-payment and compounding costs.
Additionally, AKPK offers financial advisory services to help with budgeting, debt management and navigating BNPL complexities.
The agency also provides free financial education, including online modules, and makes available the book, “Realising Potential! Unleashing Your Financial Potential”, to help individuals make informed decisions and navigate their financial lives.
