Following the 2018 enactment of regulations governing contractual terms contained in vehicle hire-purchase agreements, the Office of the Consumer Protection Board (“OCPB”) has recently resolved to adjust such regulatory scheme as part of their initiatives to alleviate the ongoing economic downturn and financial hardships suffered by consumers as a result of the pandemic, and to prevent consumers being subject to any unfair contractual terms in this respect.
The Notification of Contracts Committee Re: Prescribing Hire Purchase for Vehicle and Motorcycle Business as Contract-Controlled Business, B.E. 2565 (2022) (the “Notification“), which was enacted on 13 October 2022 and will become effective on 10 January 2023, repeals the previous regulations and amends four major aspects thereof as detailed below.
| 1. Hire-Purchase Interest Rate | |
| Previous Regulation | Newly Enacted Notification |
| Flat interest rate (i.e., calculated from the initial principal) | Effective interest rate (calculated from the outstanding principal), with the prescribed ceiling according to the age and type of vehicle;
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| 2. Early Debt Repayment
If the Debtor intends to pay off the entire outstanding balance, regardless of the scheduled installments; |
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| Previous Regulation | Newly Enacted Notification |
| The Creditor shall offer a discount to the Debtor of at least 50% of the remaining interest payable (which is not yet due). | Creditor shall offer discounts to the Debtor at the following rates, depending on the proportion of the installments already paid;
If more than 66% of the total outstanding balance has been paid, the interest which is not yet due will be waived in full. |
| 3. Enforcement through Public Auction
Upon termination of the hire purchase agreement, the Creditor is entitled to sell the vehicle(s) under the agreement through a bidding process or public auction. |
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| Previous Regulation | Newly Enacted Notification |
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In the case that the Debtor does not exercise such right to purchase within the prescribed period, the Creditor shall sell the vehicle through a bidding process or public auction and notify the Debtor/Surety thereof at least 15 days prior to the start of the bidding process or auction date. |
| 4. Default Interest | |
| Previous Regulation | Newly Enacted Notification |
| Effective rate + 3% per annum, but not exceeding 15% per annum in total | Maximum 5% per annum |
The OCPB is authorized by the Notification to adjust the maximum hire-purchase interest rate as prescribed in Item 1. every three years in accordance with subsequent economic conditions.
These new regulations under the Notification shall only be applicable to all vehicle hire purchase agreements executed after 10 January 2023. Any existing agreements which were entered into before the effective date of the Notification are still bound by the 2018 OCPB regulations.
Kudun and Partners Limited
Kudun Sukhumananda
Troy Schooneman
