New hire purchase rules abolishing flat interest rates and enabling digital agreements will be enforced from June 1, 2026, following a gazettement in January.
KOTA KINABALU: The Hire Purchase (Amendment) Act 2026 will officially come into force on June 1, introducing significant reforms to consumer credit fairness and modernising hire purchase agreements.
Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali confirmed the enforcement date, noting the law was gazetted on Jan 30, 2026.
He stated that a transition period may be granted to hire purchase providers needing time to adjust their systems and processes to comply with the new requirements.
Providers that are ready may begin offering agreements under the new amendments immediately from the June 1 enforcement date, Armizan told reporters at the National Consumer Day 2026 celebration.
A key reform abolishes the flat interest rate and the Rule of 78 method, which previously saw early loan instalments heavily weighted towards interest rather than principal repayment.
“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 explained.
The amendments also support digital transformation by permitting the use of technology, including digital signatures and electronic document submission, to improve efficiency.
Armizan said these changes form part of the 2026 consumer movement agenda focused on legal reforms to protect consumer rights and interests.
This agenda includes strengthening the legal framework governing the consumer credit ecosystem, with measures introduced since last year.
These measures include the enactment of the Consumer Credit Act 2025 (Act 873), which was passed by the Dewan Rakyat in July 2025 and the Dewan Negara in September 2025.
Regulated by the Ministry of Finance, Act 873 came into force on March 1, 2026.
The minister added that these comprehensive legal reforms reflect the government’s commitment to creating a more transparent and accountable credit ecosystem.
He said the reforms aim to improve industry governance while safeguarding the rights and interests of consumers nationwide.
The Sun Malaysia
