Amended Hire Purchase Act out to bolster consumer credit ecosystem

KOTA KINABALU (March 16): The Hire Purchase (Amendment) Act 2026 stands as among the key points in the consumer movement agenda.

According to Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali, the legal reform pertains to consumer rights and interests, covering aspects of implementation, amendments and the development of legislative frameworks.

Gazetted on Jan 30 this year, the Act will come into force this June 1.

“Among the initiatives implemented since last year is the strengthening of the legal framework governing the consumer credit ecosystem.

“This includes the enactment of the Consumer Credit Act 2025 (Act 873), which was passed in the Dewan Rakyat on July 21, 2025; and in the Dewan Negara on Sept 4, 2025,” he said at the National Consumer Day (HPK) 2026, held in Suria Sabah on Sunday.

Prime Minister Datuk Seri Anwar Ibrahim officiated at the event.

Adding on, Armizan said that under the previous method, a large part of the instalment payments during the early stage of a loan tenure was used to pay interest.

“Only a small portion would go towards the principal amount.

“This situation caused borrowers wishing to settle early to bear a higher outstanding balance that did not reflect the actual cost of the loan.

“Now, the new provision introduces the ‘Reducing Balance Method’ and ‘Effective Interest Rate’ for fixed-rate hire-purchase loans.

“Under this method, interest is calculated based on the current loan balance, making early settlement more transparent and fairer for the consumers,” said the Papar MP.

Additionally, he said the amendment supported digital transformation by allowing the use of technology in hire purchase agreements, including permission to use digital and electronic signatures and electronic document submission to improve efficiency and effectiveness in the agreement process.

“Moreover, the amendment introduces a due diligence requirement for verifying the identity of borrowers as a measure to reduce the risk of fraud,” he said.

Nevertheless, Armizan pointed out that a transition period could be granted to hire purchase providers.

“There are those who require time to adjust their systems, documentation and processes in accordance with the new requirements.

“Providers who are ready may begin offering hire purchase agreements under the new amendments as soon as the June 1 enforcement date,” he said.

As announced by the Association of Banks in Malaysia (ABM), the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) and the Association of Development Financial Institutions of Malaysia (ADFIM) last December, banking institutions would also offer a goodwill discount beginning on the June 1, 2026 enforcement date of the Hire Purchase (Amendment) Act 2026.

“This discount will be given to customers under the old method: namely the flat interest rate, and Rule of 78 – who choose to make early settlements, to ensure their outstanding balance is comparable to customers entering new agreements based on the Effective Interest Rate and Reducing Balance Method under the Hire Purchase (Amendment) Act 2026.

“This legal reform demonstrates the government’s commitment to creating a more transparent and integrity-driven credit ecosystem, improving industry governance, and also protecting the rights and interests of consumers across the country,” added Armizan.

Celebrated annually every March 15, the HPK coincides with World Consumer Rights Day.

This year, the theme is ‘Suara Kita, Kuasa Kita’ (Our Voice, Our Power).

“The theme highlights the consumers’ movement agenda throughout 2026.

“It aims to strengthen public awareness of and participation in protecting and exercising the universal consumer rights,” said Armizan.