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The sale of non-performing loans (NPLs) by banks is legal and forms part of standard risk management practices adopted by financial institutions, according to the Suruhanjaya Kredit Pengguna (SKP).
Responding to concerns over banks selling unpaid loans to third-party debt buyers, the commission said such transactions are permitted under existing laws and are widely practised in Malaysia as well as internationally to help financial institutions manage impaired assets and maintain healthy balance sheets.
However, the commission stressed that a change in ownership of the debt does not diminish a borrower’s legal rights or consumer protections.
“The sale of non-performing loans is permitted under current legislation and is a widely recognised portfolio and risk management strategy for financial institutions.
“Importantly, the sale of a loan does not extinguish or reduce a borrower’s rights. While ownership of the debt may change, the borrower’s rights and protections remain in place,” SKP told TRP in a reply.
The commission added that where a non-performing loan is acquired by an impaired loan buyer regulated under the Consumer Credit Act 2025, the buyer must comply with the same consumer protection obligations imposed under the Act.
These include requirements relating to fair treatment of borrowers, proper complaints handling procedures and ethical debt collection practices.
SKP also encouraged borrowers facing repayment difficulties to seek assistance as early as possible rather than waiting until their loans become non-performing.
It said borrowers should first engage with their banks to explore loan restructuring or rescheduling options, or seek financial counselling from Agensi Kaunseling dan Pengurusan Kredit (AKPK) or other debt counselling and management agencies registered with SKP.
“Early intervention generally provides borrowers with a wider range of options before a debt becomes significantly delinquent,” it said.
According to SKP, loans are generally only classified as non-performing after borrowers experience prolonged repayment difficulties and financial institutions have exhausted their normal recovery efforts.
As such, by the time an impaired loan is sold to a licensed impaired loan buyer, the debt would typically have already gone through the lender’s usual collection and recovery process.
Nevertheless, SKP said borrowers whose debts have been sold can still seek assistance from SKP-registered debt counselling and management agencies to assess their financial situation and negotiate suitable repayment arrangements with the new loan owner.
It reiterated that borrowers remain protected under the Consumer Credit Act 2025 and its Conduct Standards regardless of who owns the debt.
“The most important message is for borrowers to seek assistance as early as possible. Early engagement often provides the best opportunity to achieve a sustainable repayment solution and avoid further financial hardship,” SKP said.
Previously, Harian Metro reported that the total value of NPLs or bad debts in Malaysia is currently estimated at between RM30 billion and RM35 billion.
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