Malaysia – Corporate/M&A Update: The Hire Purchase Amendment Bill 2025 Comes Into Force In 2026.

On 1 December 2025, the Dewan Negara (Senate) passed the Hire-Purchase (Amendment) Bill 2025 (“Hire-Purchase Bill”) to introduce certain key amendments to the Hire-Purchase Act 1967 (“Hire-Purchase Act”). The changes introduced a fairer framework in calculating instalments and interest charges and facilitates the use of modern technology to formalise hire-purchase agreements.

The Hire-Purchase Bill will come into operation on a date to be appointed by the Ministry of Domestic Trade and Cost of Living by notification in the Gazette. 

The key amendments introduced by the Hire-Purchase Bill are set out as follows.

1. Amendments made to revise the method of calculating terms charges under a hire purchase agreement

1. Deletion of the term “base lending rate” in subsection 2(1).
2. Introduction of the term “effective interest rate” in subsection 2(1) to reflect the actual finance cost of a hire-purchase for fixed and variable terms charges respectively.
3. Introduction of the term “reference rate” in subsection 2(1) which refers to the benchmark interest rate that forms the basis for determining the pricing of variable rate financing facilities, whereby the benchmark rate is the published prevailing overnight policy rate. 
4. Deletion of the term “statutory rebate” in subsection 2(1).
5. Changes to the methodology for calculating terms charges 

1. Paragraph (b) of the Fifth Schedule now applies a single cost computation method to repossessed goods for both fixed and variable rate term charges.
2. Similarly, the Sixth Schedule has been amended to standardise the calculation of term charges for both terms charges at a fixed or variable rate.
3. The Seventh Schedule is deleted as a result of replacing “annual percentage rate” with “effective rate of interest”. 
4. New due diligence requirement
5. A new subsection 4B(1A) requires owners (financiers) to undertake the necessary due diligence to verify the identity of the intending hirer and keep proper records on the due diligence process for at least seven years from the date of the hire-purchase agreement. 
6. Digitalisation, and execution and service of documents electronically   

1. New subsections 5(1B) and 5(1C) provides that if an owner intends to serve an electronic copy of a hire-purchase agreement (or a variation of it), the hire-purchase agreement must explicitly recognise the use of electronic form and the service of such agreement electronically as effective service. This is subject to the hirer consenting in writing to the use of such electronic form and its effective service. 
2. Amendments to section 43 expand the current mode of service of notices to include service by telegram, facsimile transmission or by any other electronic or other means of transmission which results in the notice or document being transmitted in writing. 
3. Introduction of a new section 45A which recognises the legality of any notice or document made under the Hire-Purchase Act made in an electronic form provided that the legal requirements for the use of electronic messages are complied with.
4. Improved transparency and safeguarding consumer interests 

1. Subsection 6B(3) now requires the owner to notify the hirer 14 days prior to the date the revised effective interest rate comes into effect, as well as the revised amount or number of instalments, as the case may be. A failure to provide such notice constitutes an offence under the new subsection 6B(4).
2. The definitions and calculations for “net balance due” and “balance outstanding” under sections 14, 15, and 18 are amended to ensure consistent deduction of the surrender value of insurance contracts. 
3. Transitional and saving provisions 
4. A new subsection 57A(3) provides flexibility for both hirer and owner who have existing agreements prior to the coming into force of the Hire-Purchase Bill to elect the method of calculating the net balance due set out in the amended Sixth Schedule for the purpose of early completion of the agreement. 

The Hire-Purchase Bill can be accessed here. 

Contact us for further information regarding Corporate/M&A matters.