PUTRAJAYA: A total of 11 financial institutions and hire purchase companies are ready to offer hire purchase financing under the amended provisions of the Hire Purchase (Amendment) Act 2026, which comes into force today, according to the Domestic Trade and Cost of Living Ministry (KPDN).
Minister Datuk Armizan Mohd Ali (pic) said the second phase of implementation is targeted to begin in Sept 2026, and consumers who wish to benefit from the new provisions are advised to make the necessary checks before finalising their hire purchase agreements.
“However, financial institutions and hire purchase companies that are still undergoing preparations, including system integration and modifications, have been given a transition period until March 31, 2027.
“They are encouraged to adopt the new legal framework as soon as possible and notify the ministry once the transition process has been completed,” he said in a statement yesterday.
Armizan said the ministry will officially enforce the Hire Purchase (Amendment) Act 2026 from June 1 as part of efforts to strengthen consumer protection and ensure a fairer, more transparent and competitive hire purchase financing system.
In line with the amendments, the Hire Purchase (Term Charges) Regulations 2026 will also take effect on the same date.
He said the enforcement follows amendments to the Hire Purchase Act 1967, which were passed by Parliament in 2025, to strengthen the legal framework governing the consumer credit ecosystem.
According to Armizan, among the longstanding complaints from consumers were issues related to vehicle hire purchase transactions, particularly hidden interest charges and high outstanding loan balances despite early settlement.
“This situation has resulted in borrowers who wish to settle their loans early having to bear outstanding balances that do not accurately reflect the actual cost of the financing,” he said.
Among the key amendments is the abolition of the flat interest rate system and the Rule of 78 method.
Under the previous method, a substantial portion of instalment payments in the early stages of a loan was allocated to interest, with only a small amount going towards reducing the principal.
The amended law introduces the Reducing Balance Method and Effective Interest Rate for fixed-rate hire purchase financing.
