KOTA KINABALU: The Hire Purchase (Amendment) Act 2026, aimed at strengthening consumer credit fairness and modernising hire purchase agreements, will come into force on June 1, four months after it was gazetted on Jan 30, 2026.
Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali said a transition period may be given to hire purchase providers that require time to adjust their systems, documentation and processes to meet the new requirements.
"However, providers that are ready may begin offering hire purchase agreements under the new amendments once the law takes effect on June 1, 2026," he told reporters at the National Consumer Day 2026 celebration here on Sunday (March 15), officiated by Prime Minister Datuk Seri Anwar Ibrahim.
Armizan said the amendments also abolish the flat interest rate and the Rule of 78 method, under which a large portion of early loan instalments is used to pay interest while only a small portion goes towards the principal.
"This results in borrowers who wish to settle their loans earlier having to bear a high outstanding balance that does not reflect the actual cost of the loan," he said.
The amendments also support digital transformation by allowing the use of technology in hire purchase agreements, including digital signatures and electronic submission of documents to improve efficiency in the agreement process.
Armizan said the amendments form part of the consumer movement agenda for 2026, which focuses on legal reforms related to consumer rights and interests, including the implementation, amendment and development of relevant legal frameworks.
Among the measures introduced 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 by the Dewan Rakyat on July 21, 2025 and the Dewan Negara on Sept 4, 2025.
"Act 873, which is regulated by the Finance Ministry, came into force on March 1, 2026," he said.
He added that the legal reforms reflect the government's commitment to creating a more transparent and accountable credit ecosystem, improving industry governance and safeguarding the rights and interests of consumers nationwide. - Bernama
