Consumers Association of Penang

Giving voice to the little people...since 1970

How hire-purchase amendments protect consumers

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The Ministry of Domestic Trade, Cooperatives and Consumer Affairs should continue to protect consumers by strictly enforcing the Hire-Purchase Act 1967 (HPA) and the recent amendments which came into effect on 15 June 2011.

Those in the motor business are complaining that their sales are down by 20-30% and they attribute it to the amendments though they also acknowledge that the amendments do protect consumers.

Yet at the same time the Malaysian Automotive Association predicts that the sales of automobiles in Malaysia are expected to reach a new record this year despite the disruption in supply following the earthquake in Japan and delays to vehicle registrations due to the HPA. (The Star 19.07.11)

Many motor traders had adopted unfair and even illegal practices to boost sales to meet ever increasing targets and increasing profits. The amendments became necessary to curb these practices in order to protect consumer interests.

The so-called ‘drop’ in sales in not actually a drop. Formerly vehicles were sold when they were not even ready for delivery. This was done by getting consumers to sign blank documents and pay deposits. This created many problems for consumers, e.g cars not delivered on promised dates; cars registered without first being seen by purchasers; chosen colour not available, so take another colour or wait longer; cars that had been driven and thus not brand new.

Now the dealers are required to have the cars ready for delivery before signing agreements for their sale. Thus consumers can see and examine the actual cars they are purchasing. Since under the previous arrangements some dealers had sold cars that can be on the road only in another 2 or 3 months, naturally they will not have the stock for immediate sale now. This does not mean there is a drop in sales as portrayed.

Enforcement of the HPA will benefit consumers because:-

• Motor dealers cannot sell vehicles that are not in the showroom.

It is a consumers’ right to see and inspect the good he is purchasing – even for a very small item like a loaf of bread. But purchasers of new cars had lost this right as they were required to sign blank forms and Hire-purchase Agreements without even seeing, let alone examining the vehicles that would be delivered to them. This was a violation of the existing law all these years.


• Motor dealers cannot sell used vehicles that had unapproved repairs done on them after accidents.

Consumers should only be sold cars which are road worthy. From the 15 June to 26 June 2011, Puspakom’s 18-point inspections revealed that out of the 8,221 cars inspected, 125 failed inspection under the mandatory B5 category (i.e. engines/chasis tinted mirror and half cut cars) and 2,082 were found to have been repaired without the approval of the Road Transport Department or JPJ. Only the remaining 6,014 passed the inspection. This again is an existing provision of the law that had not been followed all these years.

Motor dealers have agreed in principle that the 18-point Puspakom test is good for consumer protection. However they raised some valid concerns about the reliability of the reports. Puspakom has assured that it will address these concerns and carry out the inspection more professionally.

Second hand car dealers should give PUSPKOM time to work out the teething problems and provide feedback for improvement of its inspection services.

• Motor dealers now cannot collect more than 1% of the car price as booking fee and must refund 90 % of the fee upon withdrawal of the booking.Consumers used to be coaxed into paying deposits on the assurance that if their loans were not approved, the deposits would be refunded. However, consumers used to have great difficulty getting back the deposits, some having to go to the Tribunal to get them back. It is only fair that the consumer should get most of his money back since there was not much administrative work carried out.

• No-more”marking up” is allowed to facilitate 100% loan.

There were car dealers who increased their sales by helping buyers to get 100% hire-purchase loans. This they do did by marking up the “cash price” of the vehicles, though it has always been an offence to give wrong information under the HPA. Thus hire-purchase loans were given to those who could ill afford to maintain the monthly instalments. This resulted in many non-performing hire-purchase loans, vehicles being repossessed, and some consumers being declared bankrupt. It is therefore to the advantage of consumers that banks are demanding that the car dealers strictly abide by the HPA.

According to the Insolvency Department, becoming bankrupt because of one’s inability to service vehicle loans topped the list of bankruptcy cases in Malaysia, accounting for about 24% of the total 80,370 cases between 2005 and May 2010 ( The Star 11.08.2010)

The dealers agree that the amendments are for the good of their customers. Therefore they should work hand-in-hand with the Ministry to implement fully all the provisions of the Hire-Purchase Act. End of the day, it will be for their own good as well since consumers would have confidence that they are not being conned by some unscrupulous dealers, and they are purchasing vehicles that they have seen and examined and in the case of used vehicles, these are fit for the purpose and comply with requirements of the law. They should therefore not protest against full implementation of the law as it will also benefit them in the long run.

For years consumers have been at the receiving and losing end. As such, the amendments must be kept to level the playing field.

We reiterate that the Ministry must stand firm and continue to protect consumers. It must implement fully the law passed by parliament to protect consumers.

Press statement (21 July 2010)