Bill on HP Act may be tabled in April

PETALING JAYA: A Bill to amend the Hire-Purchase Act (HP Act) is expected to be tabled in Parliament for first reading in April to safeguard vehicle owners against unscrupulous repossession practices.

The Government has said it is looking at amending the Act this year owing to the rising number of reported cases of vehicle owners being harassed by repossessors hired by financial institutions.

A source told StarBiz that a meeting was held on Feb 8 between the various consumer groups and officials of the Domestic Trade, Cooperatives and Consumerism Ministry to look into the possible amendment to the HP Act.

The ministry officials then met industry players comprising financial institutions the next day regarding vehicle ownership and repossession, among other things.

“The proposed amendment will likely see tighter regulation of the activities of vehicle repossessors to ensure that hirers (consumers) are not victimised and see the capping of repossessor fee,” the source said.

“The calculation of interest for hire-purchase will also be reviewed to make sure that hirers are capable of making timely periodical payments, besides the granting of a court order for repossession of a vehicle,’’ the source added.

National Consumer Complaints Centre chief executive Muhammad Shaani Abdullah, who is also secretary of the Federation of Malaysian Consumers Associations, said there had been cases of consumers being offered 100% financing by financial institutions which turned out to be false.

Shaani said he welcomed the move to review the outdated HP Act and called for the repossession and storage fees to be capped.

He told StarBiz that there was no regulation in the Act against any wrongdoing by the agents or repossessors including criminal intimidation and force.

“There is only ‘Guidelines on the Appointment and Conduct of the Repossessor,’ issued by the Association of Finance Companies of Malaysia.

“There are no provisions as to the recourse or restitution to the victims in case of non-compliance or even wrongdoing in the HP Act,’’ he noted.

Shaani noted that under the Act, a bank could repossess a vehicle only if a hirer defaulted on two successive payments or in the last payment, and a written notice of intent to repossess had expired. The notice gives the hirer no less than 21 days to pay the arrears or the balance and the interest.

He also urged the Government to stop financial institutions from blocking payment channels if the vehicle owner defaults on payment as the banks would indirectly gain from this because every day of delay in payment incurs overdue interest and penalty charges.

According to Shaani, many advanced countries have replaced the HP Act with Consumer Credit Act to regulate the conduct of owners/banks relating to loan/goods recovery.

Consumer Association of Penang (CAP) president S.M. Mohamed Idris said there was an urgent need to further regulate vehicle repossession.

“The law should be specific on when – for example, not in the middle of the night or in the early hours of the morning – and where (for example, not at traffic lights) the repossession can take place.

“Companies in the repossessing business have to be licensed by the Ministry of Domestic Trade, Cooperatives and Consumerism so that if they use strong-arm tactics or unreasonable force, they will lose their licence to operate,” he added.

Banks should support this licensing move if they did not want to be accused of using thugs to carry out the repossession, Idris said.

Before a car was repossessed, he said the owner should first be allowed to remove all his personal belongings.

CAP proposes that a court order is made a requisite when more than a third of the total cost of the hire-purchase loan has been paid, as practised in Britain.

Meanwhile, The Association of Banks in Malaysia (ABM) in a statement argues the current HP Act afforded ample protection for the hirer.

“We must be careful to balance the need to protect consumers and the risk of high default rates as the recourse by banks against the hirer is made more difficult.

“Repossession is used by the banks as a last resort and only after all efforts to request the hirer to regularise his payment have failed.

“Banks do assist hirers by rescheduling their accounts in the event the hirers were to approach the banks and inform them that they face financial difficulties,’’ ABM said.

Based on industry statistics, the association said non-performing loans comprised only about 2% of the total industry hire-purchase portfolio and hence, only a small segment of the hirers defaulted on their loans.

ABM said its member banks used repossessors that were vetted by and registered with the banks and were monitored.

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