THE National Consumer Advisory Council (Majlis Penasihat Pengguna Negara, MPPN) has voiced full support for the 2025 amendments to the Hire-Purchase Act 1967, describing them as a major leap toward a more transparent, ethical and consumer-friendly credit ecosystem in Malaysia.
The Hire-Purchase (Amendment) Bill 2025, introduced by the Minister of Domestic Trade and Cost of Living, was passed by the Dewan Rakyat on 8 October 2025.
In a statement, MPPN chairman Mohd Khair Ngadiron said the amendments form part of a wider national agenda to strengthen consumer credit protections and modernise financing practices.
Among the most significant changes is the abolishment of the flat rate interest system and the Rule of 78, both of which have long been criticised for disproportionately burdening consumers with high repayment costs. T
These outdated mechanisms are being replaced with the effective interest rate model and the reducing balance method, which better reflect actual repayment progress over time.
The updated legislation also paves the way for greater integration of digital technologies in hire-purchase arrangements.
It now permits the use of online platforms and digital verification tools to enhance transparency, efficiency, and consumer convenience. In addition, the term “base lending rate” has been formally replaced with “reference rate” to bring the Act in line with current financial industry standards.
“These reforms will particularly benefit middle- and lower-income consumers, who often depend on hire-purchase schemes to acquire vehicles and essential household items,” said Mohd Khair.
He added that the amendments are expected to prevent consumers from being saddled with excessive interest charges, foster transparency in interest calculations, support the adoption of digital solutions in consumer finance, and enhance ethical governance across the credit industry.
The MPPN also commended the Ministry of Domestic Trade and Cost of Living (KPDN) for its commitment to consumer rights, particularly through policies that balance public interest with sustainable industry growth.
“As the government’s advisory body on consumer affairs, MPPN remains committed to providing strategic input to ensure that all consumer-related legislation and reforms are inclusive, progressive, and focused on public wellbeing,” the statement added.
The passage of the amendments represents a critical shift in Malaysia’s approach to regulating hire-purchase agreements, aligning consumer rights with evolving financial realities and digital transformation. - October 9, 2025
