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Kota Kinabalu: The Hire Purchase (Amendment) Act 2026, which introduces major reforms to Malaysia’s hire purchase framework, will come into force on June 1 to strengthen consumer protection and improve transparency in credit agreements.

Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali (pic) said the amendments are part of the government’s broader effort to reform the consumer credit ecosystem and enhance fairness in financing arrangements.

He said the reforms abolish the flat interest rate system and the Rule of 78, which had been criticised for placing a heavier interest burden on borrowers during the early stage of loan repayments.

He said the amendments will introduce the reducing balance method and effective interest rate calculation for fixed-rate hire purchase financing, making early loan settlement more transparent and fair to consumers.

Armizan said the amendments, gazetted on Jan 30 and announced during the National Consumer Day launch officiated by Prime Minister Datuk Seri Anwar Ibrahim at Suria Sabah Shopping Mall on Sunday, will also allow electronic documentation and digital signatures while introducing borrower identity verification requirements to reduce fraud.