KUALA LUMPUR: Consumers can look forward to having hire purchase loans with more flexible interest rates under a proposal to amend the Hire Purchase Act 1967.
The proposal, which would tighten current regulations, would allow banks to charge flexible interest rates for hire purchase loans instead of the current fixed interest rate.
Domestic Trade and Consumer Affairs Minister Datuk Mohd Shafie Apdal said the proposal was one of the amendments to be made to the Hire Purchase Act 1967.
The amendments are aimed at giving consumers a fairer hire purchase contract, where interest rates would take into consideration factors such as depreciation of the goods sold.
Currently, borrowers are charged a flat interest rate for the entire duration of the hire purchase contract and this practice burdens borrowers who have to pay more interest, he said after launching the Consumers Day celebration at Federal Territory level at Saloma Bistro yesterday.
Interest for hire purchase loans under the current practice is calculated based on the original loan amount and does not take into consideration the decreasing principal amount of the loan.
Thus, a RM50,000 loan at a 7% interest rate would draw RM17,500 in interest and monthly instalments of RM1,125 for five years.
The borrower would end up paying RM67,500 for the RM50,000 loan.
Based on a loan calculator provided in the Malayan Banking Bhd web portal, Maybank2U.com, a flexible interest rate such as for a housing loan would only draw a monthly instalment of RM891 and a borrower will pay RM53,460 for the five-year duration.
Mohd Shafie said the flexible interest rate was just a small component of the proposed amendments to the Act.
We are looking at all aspects of the legislation to ensure that consumers are protected, he said.
He said the ministry had sent a final draft on the Hire Purchase Bill to the Attorney-Generals office and hoped to table it at next months Parliament meeting.
I have personally requested the Attorney-General to speed up the matter, he said, adding that he also planned to table amendments to the Direct Selling Act 1993 to curb the operation of irresponsible businesses under the pyramid scheme and multi-level marketing concept.
On another matter, he said the ministry would propose to the Cabinet the setting up of a special court to handle the backlog of Intellectual Property cases.
We are of the view that immediate action should be taken to resolve the backlog of cases. If we can set up a special court for that purpose, specific cases could be heard by judges who have expertise in the intellectual property field, he said.