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PUTRAJAYA: The Hire Purchase (Amendment) Act 2026, effective June 1, introduces major reforms to improve transparency, fairness and consumer protection in hire purchase financing, especially for vehicle buyers.

Domestic Trade and Cost of Living Minister Datuk Armizan Mohd Ali said the law replaces outdated practices like the flat interest rate and Rule of 78 with the Reducing Balance Method and Effective Interest Rate (EIR), ensuring borrowers pay interest based on actual outstanding balances and benefit more from early settlements.

The reform also enables digital agreements, including e-signatures, and introduces stricter two-stage identity verification to curb fraud.

Eleven financial institutions are ready under phase one, with broader rollout in September. A transition period runs until March 31, 2027.

Armizan urged consumers to verify that financing agreements comply with the new rules, saying the changes aim to boost public confidence and create a more transparent, responsible credit system.