Digital lenders hide behind ‘consent’ tactics while outdated laws leave victims unprotected, say experts
PETALING JAYA: Loan sharks, commonly known as “Ah Longs”, are increasingly moving online, exploiting loopholes in Malaysia’s outdated laws to trap desperate borrowers.
Experts warn that by disguising coercion and intimidation as borrower consent, these unlicensed lenders place themselves beyond the reach of enforcement agencies.
Federation of Malaysian Consumer Associations (Fomca) CEO Saravanan Thambirajah said the problem is compounded by the fact that the Moneylenders Act 1951 remains geared towards conventional, face-to-face transactions, leaving digital lending largely unregulated.
“From a consumer protection perspective, these loans are promoted through deceptive online adverts such as ‘easy cash’, ‘no documents’ and ‘urgent medical help’,” he said.
“Key terms like interest rates, penalty charges and collection practices are hidden or misrepresented. When consent is obtained through deception or desperation, it is not real consent.
“People sign under duress and with no real alternative. Those who end up with loan sharks are often B40 households, gig workers, small business owners and youths with unstable income or poor credit history.”
Saravanan said digital platforms have become part of the problem rather than the solution, allowing illegal moneylenders to operate with near impunity.
“Today, illegal lenders freely buy adverts and promote their services on major platforms. Social media companies, marketplaces and messaging-based business platforms must be held jointly responsible when they profit from or repeatedly host unlicensed moneylenders after being alerted.
“When the law treats this as a civil matter simply because a borrower clicked ‘agree’, it fails to recognise the imbalance of power and the abusive practices behind these loans.”
According to a written reply in Parliament to Wong Shu Qi (PH–Kluang) on Nov 11, the Home Ministry said a total of 1,452 cases related to unlicensed moneylending were reported nationwide from 2021 to October this year, involving losses amounting to RM4,897,213.54.
Of these, 450 cases have been resolved, including 213 taken to court, 123 classified as “no further action” and 114 still unresolved.
Criminologist Datuk Shahul Hamid Abdul Rahim said loan shark syndicates employ a “consensual shield” tactic, presenting themselves as legitimate lenders while manipulating victims into accepting unfair loan terms.
“Ah Longs use the ‘consensual shield’ tactic, meaning they pretend to operate based on voluntary consent between two parties,” he told theSun via WhatsApp.
“From a civil law perspective, such agreements or debts entered into voluntarily can be considered valid if there is no element of coercion or any clear pinpoint of wrongdoing.
“However, in criminal law, these syndicates actually manipulate the idea of consent through psychological pressure, threats or exploitation of desperate victims.
“They then keep evidence such as consent messages, screenshots or videos as their legal protection to show that the borrower willingly agreed to take the loan.”
Shahul said the rise of online platforms has transformed traditional loan shark operations into a sophisticated web of digital threats that blur legal boundaries and complicate enforcement.
“Previously, their activities were easier to detect, for example through violent posters or threats displayed at victims’ homes. Now, these activities operate via mobile apps or social media, using private platforms with fake identities, offshore hosting or cryptocurrency transactions.
“As a result, many cases are difficult to categorise under a single law. For instance, if an Ah Long spreads a victim’s photo or personal information, it falls under Section 233 of the Communications and Multimedia Act 1998. If there are elements of financial threats, it might be classified under Section 384 of the Penal Code.
“In reality, there is currently no single, comprehensive law to deal with digital loan sharks that use both psychological and technological tactics simultaneously.”
Both experts stressed the urgent need for reforms, including stronger consumer safeguards, clearer regulation of digital lending platforms, updated laws recognising psychological coercion and coordinated multi-agency enforcement to curb online loan sharks exploiting legal gaps and vulnerable borrowers.
