(A) 1st day of Implementation Hire Purchase Act 1967 (amendments 2010)
(B) Implementation of HP Act amendments
Let us first see and understand those amendments. The followings are excerpts and extractions from the bill tabled in Parliament.
Clause 7 of the Bill seeks to amend Section 16 of the Hire-Purchase Act 1967 to impose new conditions on the owner in relation to repossession under this Act. Section 16 of the principal Act is amended by:
(a) by substituting for subsection (1) the following subsection:
“(1) Subject to this section, an owner shall not exercise any power of taking possession of goods comprised in a hire-purchase agreement arising out of any breach of the agreement relating to the payment of installments unless the payment of installments amounts to not more than
## In a simpler language, if the balance loan is MORE than
i- we did not pay our monthly car loan for 2 consecutive months, then bank must issue a notice,
ii- the notice is at least 21 days
iii- after the 21 days, the notice expired and Bank can re-possess the car.
(b) by inserting after subsection (1) the following subsections:
“(1A) Notwithstanding subsection (1), if the payment of instalments made amounts to more than
(1B) Where an owner has obtained an order of the court under subsection (1A) and he has served on the hirer a notice, in writing, in the form set out in the Fourth Schedule and the period fixed by the notice has expired, which shall not be less than twenty-one days after the service of the notice, the owner may exercise the power of taking possession of goods referred to in subsection (1A).”
## In a simpler language, if the balance loan is LESS than
33.33 75%% of the car price that we buy, BANKS can repossess the car if and only when:
ii- we did not pay our monthly car loan for 2 consecutive months, then bank must issue a notice,
iii- the notice is at least 21 days
iv- after the 21 days, the notice expired and Bank MUST first obtain a COURT-ORDER
v- with a court order, Banks can re-possess the car.
Clause 8 of the Bill seeks to introduce new sections 17A and 17B into Act 212 respectively to require any person who is engaged in repossession activity to obtain a permit from the Controller and to require an owner to appoint only permit holders under section 17A to undertake repossession. The principal Act is amended by inserting after section 17 the following sections:
“Permits for repossession 17A. (1) No person shall undertake repossession of goods comprised in a hire-purchase agreement without a written permit issued by the Controller.
(2) Any person who contravenes subsection (1) shall be guilty of an offence under this Act.
Offence to appoint non-permit holder
## In a simpler language, the Government via the Controller WILL APPOINT the REPO-MAN by issuing them with a written PERMIT. Gone will be those days when the public are confronted by gangsters, criminals and/or hooligan as reposessors. If they still exist, then maybe our Government are the gangsters...
17B. (1) An owner shall appoint as his agent to undertake the repossession of goods comprised in a hire-purchase agreement a person who is a permit holder under subsection 17A(1).
## Only those appointed by the Government via the Controller, are allowed to repossessed the car.
Clause 9 of the Bill seeks to introduce a new section 30A into Act 212 to regulate booking fees (New section 30A). The principal Act is amended by inserting after section 30 the following section:
“Booking fee 30A". (1) No owner, dealer, agent or person acting on behalf of the owner shall collect or accept a booking fee from an intending hirer before the receipt of the duly completed form set out in Part II of the Second Schedule by the hirer.
(2) The booking fee referred to in subsection (1) shall not exceed one percent of the cash price of the goods comprised in a hire-purchase agreement.
(3) Notwithstanding anything under this Act, the booking fee shall form part of the deposit under section 31.
(4) An owner, dealer, agent or person acting on behalf of the owner shall refund ninety percent of the booking fee to the intending hirer upon the withdrawal of the booking of the goods comprised in a hire-purchase agreement.
## Car buyer can only pay the Booking fees of not more than 1% of the car price when the Part II 9of second schedule) of the agreement is duly completed. However, car buyer will only receive 90% of the Booking fees on any cancellation of car booking after the booking fee payment.
Clause 10 of the Bill seeks to introduce new subsections (1A) and (1B) into section 31 of Act 212 to require deposit to be collected upon the signing of hire-purchase agreements and to provide remedy to the hirer in the event the owner, dealer, agent or person acting on behalf of the owner fails to deliver the goods intended for the hire-purchase agreement. Section 31 of the principal Act is amended by inserting after subsection (1) the following subsections:
(1A) An owner shall collect the deposit upon the signing of the hire-purchase agreement.
(1B) If any owner, dealer, agent or person acting on behalf of the owner fails to deliver the goods intended for the hire-purchase agreement to the intending hirer, the owner, dealer, agent or person acting on behalf of the owner shall refund the full amount of the deposit to the intending hirer.
## ALL BOOKING FEES & DEPOSITS MUST BE PAID TO THE BANK for any booking of car with hire purchase financing from any car dealer and if the dealers failed to deliver the car, the customer must be refunded in full amount.
For further information see Parliament bill no D.R.18/2010 at www.parlimen.gov.my
What would be the repercussions from these amendments?
The effect to the customer:
1) Minimum Booking fees & Downpayment is fix by the Act and non negotiable.
2) The new legislation provides unnecessary red-tape for customer's hire-purchase HP-loan application.
3) With the more restrictive measure on repossession, Bank will be more stringent with loan approval and may further increase the risk factor for overall car buyer.
4) Approval for loan will be slower with the additional work-load to be undertaken by Banks.
5) Less personalized services between the dealers and Customers. Currently, car dealer would extend personalized services such as collection of booking fees, downpayment and signing of agreement at the customer's convenient (anytime) and venue (at the customer's house, workplace etc)
In short, car buyer will take a longer time for the delivery of their car and they will need to pay the FULL 10% downpayment to the bank. Of course, there are benefits derived from the amendments too.
Impact to Car dealers:
1) Without any booking fees paid to car dealers at the point of booking (Clause 9), it will be difficult for car dealers to secure any stocks for the customers. Currently, to order any cars from Proton Edar, the dealers are required to submit a three months forecast and one month firm commitment which was based on the bookings paid in hand.
2) Dealers will not place any order of cars (from Proton Edar) without any bookings paid or received, to avoid abrupt cancellation by customers which will be a costly stock-holding cost to dealers.
3) Without any firm order or commitment from the customer via the booking fees paid, there will be alot of "Booking-Hantu" where customers simply book a car without any commitment and 'speculative buyers'.
4) Car dealers are required to pay first to Proton Edar for vehicles ordered. The Booking fees and downpayment paid are a portion of the working capital required to secure the vehicle to the said customers. When the bookings and down-payment are paid to the Bank, the dealers cashflow will be effected.
5) Banks too will have to multi-tasked their personnel to expect more than 50,000 (from Proton Edar sales transactions alone (excluding other car dealers) when customer had to pay their booking fees, sign hire-purchase documents and pay downpayment to the Bank.
We are meeting with various stake-holders to further discuss the impact of the amendments.