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Amendments in the HPA – more than meets the eye? latest!

KUCHING: The recently amended Hire Purchase Act (HPA) 1967 has spurred much controversy amongst the parties concerned in the auto sector.

Although the new Act was implemented with good intentions, however one fundamental question lies ahead; does the implementation as a whole cause more harm than good or could there really be a further upside to the new Act?

To recap, the amended HP act was implemented on June 15 by the Ministry of Domestic Trade, Co-operatives and Consumerism on June 15.

Amongst others, the amendment was meant to protect customers from losing their bookings and deposits paid to unscrupulous sales advisors and car dealers. Apart from that, the new Act was aimed at avoiding unnecessary delay in refunding customers monies paid for booking and down-payment in the event of any cancellation of purchase or failure to secure hire-purchase loans.

Under the amended Act, buyers would only need to pay booking fees after being served with the duly completed Schedule 2 (part 1 and 2). In this regard, banks would only issue Schedule 2 after the hire purchase loan had been approved and this would take an estimated three days from the point of submission.

However, in order to get their loans approved, car buyers must first pay a down-payment of ten per cent of the total on-the-road car price to the bank.

According to Thomas Teo, a used-car dealer who has been in the business for the past 30 years, the down-payment of ten per cent would be a problematic issue for some consumers.

“Although the ten per cent of total down-payment may be a small amount to some people, but a lot of lower-income clients are not able to collect the total lump-sum of money in such a short time,” stated Teo.

Hence, although the amendment was aimed at filtering out customers who cannot afford to buy the car and protecting the bank from defaulted loans, the implementation as a whole would bring total car sales down.

According to a manager at the local used-car dealership in Kuching, with the new Act announced, the sales of used-car had also decreased by an estimated 50 per cent since its implementation.

According to Datuk Aminar Rashid Salleh, managing director of Perusahaan Kedua Otomobil Sdn Bhd (Perodua), car sales would indeed see an impact as the group might not be able to efficiently register the vehicles on time for its customers.

In addition to that, the new amendment which prohibits car dealers from collecting any booking fees before the client was served with a Second Schedule notice makes it difficult for dealers to ensure any form of concrete commitments from the buyers.

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